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Employment costs rose more than expected in the third quarter in a sign that more inflation could be brewing in the U.S. economy. The Labor Department’s employment cost index rose 0.8 percent for the period, ahead of the estimate of 0.7 percent from economists surveyed by Refinitiv. Wages and salaries rose 0.9 percent, well ahead of expectations for 0.5 percent. Benefit costs were up 0.4 percent. On a yearly basis, wages and salaries jumped 3.1 percent, the biggest increase in 10 years. Wage increases have been the missing link in the economy since the recovery began in mid-2008. Average hourly earnings have been rising steadily but have stayed below the 3 percent level as slack has remained in the labor market.

However the unemployment rate is now at 3.7 percent, the lowest since 1969, and wage pressures have begun to build. The Federal Reserve has been raising interest rates in an effort to stave off future inflationary pressures, though the central bank’s preferred gauge of inflation rose just 2.5 percent in the third quarter, including a 1.9 percent increase for health benefits. “The employment cost index data adds to the broader evidence that wage growth has continued to trend gradually higher over recent quarters,” Michael Pearce, senior U.S. economist at Capital Economics, said in a note. “And with labor market conditions still tightening, we expect wage growth will accelerate further from here.”

As Chinese markets began to wake, yuan just broke below 6.98/USD for the first time in this downswing, despite PBOC liquidity withdrawals sending money market rates spiking (to squeeze yuan shorts). [..] if former UBS Chief Economist George Magnus is right, any hopes for the G20 meeting between Trump and Xi should be extinguished. In a series of tweets, Magnus warned… “Trump and Xi are supposed to meet at the G20 in Buenos Aires at end month. Will they talk trade? They need to cos Trump has already threatened to subject the other of 50% of imports from China to punitive tariffs. This is how he prepares the ground, telling Fox News: “I think that we will make a great deal with China and it has to be great, because they’ve drained our country,”.

Designed to turn XJP frostier, be even less inclined to bring something to the table, and more anxious not to be seen to be succumbing to foreign pressure. So I think, barring something going on in the background, these talks are set up to fail, assuming they happen. The 10% tariff rate is due to go to 25% on 200bn $ of goods on 1 Jan anyway, and we shd probably expect WHY to go for the remaining 250bn $ of imports in new year… 2019 big year for China. centenary of founding of CCP. and rivals Soviet CP’s 72 years in power. Xi’s Chinese Dream of Rejuvenation of Chinese Ppl isn’t just a slogan. Being seen to succumb to Trump’s WH is just not on. Expect both sides to dig in further

Begs question as what China will do next. Xant tit for tat any more, as they have run out of room. @davidjlynch in @washingtonpost reminds us that tourism cd be a target. Targeting US firms also could be cranked up. Yuan depreciation also poss tho v risky at home too … Much longer discussion and background written up in Red Flags, just out in the US this month….the details change with the news and announcements, but the substance is sadly all too clear.

Should we pity the fools who bought the overpriced crap? The entire westernworld is filled with people who grossly overpaid on the back of ultra-low rates. They’re all going to claim they’re victims, and there’s so many of them they may actually be bailed out, at the cost of those who haven’t been so stupid.

Higher mortgage rates and overheated home prices hit Southern California home sales hard in September. The number of new and existing houses and condominiums sold during the month plummeted nearly 18 percent compared with September 2017, according to CoreLogic. That was the slowest September pace since 2007, when the national housing and mortgage crisis was hitting. Sales have been falling on an annual basis for much of this year, but this was the biggest annual drop for any month in almost eight years. It was also more than twice the annual drop seen in August. “The double whammy of higher prices and rising mortgage rates has priced out some would-be buyers and prompted others to take a wait-and-see stance,” said Andrew LePage, a CoreLogic analyst, in the release.

“There was one caveat to last month’s sharp annual sales decline — this September had one less business day for recording transactions. Adjusting for that, the year-over-year decline would be about 13 percent, still the largest in four years.” On a monthly basis, sales fell 22 percent in September compared with August. Sales usually fall about 10 percent from August to September. Sales of newly built homes are suffering more than sales of existing homes, likely because fewer are being built compared with historical production levels. Newly built homes also come at a price premium. Sales of newly built homes were 47 percent below the September average dating back to 1988, while sales of existing homes were 22 percent below their long-term average.

The median price of Southern California homes sold in September, $505,000, was still 3.6 percent higher than it was a year ago. That was the lowest annual gain for any month in more than three years. “Price growth is moderating amid slower sales and more listings in many markets,” LePage said. “This is welcome news for potential homebuyers, but many still face a daunting hurdle – the monthly mortgage payment, which has been pushed up sharply by rising mortgage rates.”

A rise in so-called “zombie firms,” alongside higher interest rates, has led several experts to warn of the impact it could have on employment in developed nations. Zombie firms, as they are often called, are companies that would have defaulted in a normal economic cycle but continue to function due to an ultra-low interest rate environment. “Like the characters after which they are named, zombie firms are creatures that really should have shuffled off to the next realm some time ago. Instead of embracing death, they soldier on, usually wreaking havoc on the rest of society,” Eoin Murray, head of investment at Hermes Investment Management, said in a research note Wednesday.

Economists define a zombie firm as one which is at least 10 years old but is unable to cover its costs with its profits. Murray described collapsed facilities management and construction services company Carillion as one. Ever since the financial crisis, these firms have taken on huge pile of debts as borrowing became so cheap on the back of low interest rates. The numbers of such firms are currently on the rise, according to a report from the Bank of International Settlements (BIS) released last month. Decades of falling interest rates have led to a sharp increase in the number of zombie firms that are potentially threatening economic growth and preventing interest rates from rising, the report stated.

“Our analysis suggests that this increase is linked to reduced financial pressure, which in turn seems to reflect in part the effects of lower interest rates,” the research said, adding that these “zombies” weigh on economic performance because they are “less productive and because their presence lowers investment in and employment at more productive firms.”

British Prime Minister Theresa May has struck a tentative deal with the European Union that would give UK financial services companies continued access to European markets after Brexit, the Times reported on Thursday. British and European negotiators have reached tentative agreement on all aspects of a future partnership on services, as well as the exchange of data, the British newspaper reported, citing government sources. The services deal would give UK companies access to European markets as long as British financial regulation remained broadly aligned with the EU’s, the Times reported. The British pound jumped as much as 0.5 percent against the dollar following the report.

Global banks operating in the UK have had to reorganize their operations around Britain’s departure from the European Union, due to take place in March next year. Many have set up new European hubs and begun to move operations, senior executives and staff to ensure they can continue to serve their continental clients if Britain leaves the bloc without a deal. According to the Times’ report, EU will accept that the UK has “equivalent” regulations to Brussels, and UK financial services companies will be allowed to operate as they now do in Europe. EU officials have said that the EU’s financial market access system, known as “equivalence,” under which Brussels grants access to foreign banks and insurers if their home rules converge with the bloc’s, is probably Britain’s best bet.

Five Republican senators have asked the Trump administration to suspend talks to transfer U.S. nuclear technology to Saudi Arabia following the killing of journalist Jamal Khashoggi at the kingdom’s consulate in Turkey. The lawmakers, led by Senator Marco Rubio, threatened to block any agreement to export civilian nuclear technology to Saudi Arabia, potentially setting up a showdown with the White House. The Trump administration has courted the Saudis as they seek to build 16 nuclear power reactors over the next 25 years, an endeavor that would generate tens of billions of dollars in economic activity.

In a letter to President Donald Trump, the senators say the slaying of Khashoggi, as well as other foreign policy issues, raise questions about whether the Saudi leadership should be entrusted with U.S. nuclear technology and know-how. “The ongoing revelations about the murder of Saudi journalist Jamal Khashoggi, as well as certain Saudi actions related to Yemen and Lebanon, have raised further serious concerns about the transparency, accountability, and judgment of current decisionmakers in Saudi Arabia,” the lawmakers wrote in a letter to Trump. “We therefore request that you suspend any related negotiations for a U.S.-Saudi civil nuclear agreement for the foreseeable future.”

New Zealand has topped the World Bank’s ranking of the best countries to start and run a business in 2018, ahead of Singapore, Denmark and Hong Kong. The World Bank said New Zealand had retained its position in its Doing Business report ahead of 190 other countries, despite not implementing any reforms in the last year. The UK slipped to ninth place while Norway climbed to seventh in a year when the World Bank said governments pressed ahead with a record number of reforms to business regulations and tax rules to support private businesses. Georgia, the former Soviet satellite state, retained its position at number six in the rankings, despite persistent criticism from aid agencies that the World Bank was rewarding a country with high levels of inequality, showing that a business-friendly environment is not in and of itself a means of alleviating poverty.

Macedonia, the United Arab Emirates, Malaysia and Mauritius are also among the business-friendly countries in the World Bank’s top 20 that rank among the highest in Oxfam’s list of unequal nations. The Organisation for Economic Cooperation and Development criticised Mauritius last year for acting as a tax haven and leaching tax revenues from mainland African nations. Singapore, often held up as a model for post-Brexit Britain, recently topped Oxfam’s list of unequal nations. The World Bank Group’s president, Jim Yong Kim, said the private sector played an important role in “creating sustainable economic growth and ending poverty around the world”.

For years, they heard little from daughters who went to join Islamic State. Now dozens of families across Europe have received messages from those same women, desperate to return home from detention in Syria. They are among 650 Europeans, many of them infants, held by U.S.-backed Kurdish militias in three camps since IS was routed last year, according to Kurdish sources. Unwanted by their Kurdish guards, they are also a headache for officials in Europe. In letters sent via the Red Cross and in phone messages, the women plead for their children to be allowed home to be raised in the countries they left behind. In one message played by a woman at a cafe in Antwerp, the chatter of her young grandchildren underscores their mother’s pleas.

Another woman in Paris wants to care for three grandchildren she has never met, born after her daughter left for Syria in 2014, at the age 18. “They are innocent,” she said. “They had no part in any of this.” Like other relatives of those held in Syria, the two mothers asked to remain anonymous – afraid of being linked to IS and worried their daughters may face reprisals. The United States has taken custody of some citizens, as have Russia and Indonesia, and wants Europe to do the same – fearing the camps may breed a new generation of militants. “We are telling European governments: ‘Take your people back, prosecute them. … They are more of a threat to you here than back home,’” a senior U.S. counterterrorism official said.

Silicon Valley technology giants such as Facebook and Google have grown so dominant they may need to be broken up, unless challengers or changes in taste reduce their clout, the inventor of the World Wide Web told Reuters. The digital revolution has spawned a handful of U.S.-based technology companies since the 1990s that now have a combined financial and cultural power greater than most sovereign states. Tim Berners-Lee, a London-born computer scientist who invented the Web in 1989, said he was disappointed with the current state of the internet, following scandals over the abuse of personal data and the use of social media to spread hate.

“What naturally happens is you end up with one company dominating the field so through history there is no alternative to really coming in and breaking things up,” Berners-Lee, 63, said in an interview. “There is a danger of concentration.” But he urged caution too, saying the speed of innovation in both technology and tastes could ultimately cut some of the biggest technology companies down to size. “Before breaking them up, we should see whether they are not just disrupted by a small player beating them out of the market, but by the market shifting, by the interest going somewhere else,” Berners-Lee said.

“I am disappointed with the current state of the Web,” he said. “We have lost the feeling of individual empowerment and to a certain extent also I think the optimism has cracked.” Facebook CEO Mark Zuckerberg apologized after the Cambridge Analytica scandal and pledged to do more to protect users’ data. But social media, Berners-Lee said, was still being used to propagate hate. “If you put a drop of love into Twitter it seems to decay but if you put in a drop of hatred you feel it actually propagates much more strongly. And you wonder: ‘Well is that because of the way that Twitter as a medium has been built?’”

The world has seriously underestimated the amount of heat soaked up by our oceans over the past 25 years, researchers say. Their study suggests that the seas have absorbed 60% more than previously thought. They say it means the Earth is more sensitive to fossil fuel emissions than estimated. This could make it much more difficult to to keep global warming within safe levels this century. According to the last major assessment by the Intergovernmental Panel on Climate Change (IPCC), the world’s oceans have taken up over 90% of the excess heat trapped by greenhouse gases.

But this new study says that every year, for the past 25 years, we have put about 150 times the amount of energy used to generate electricity globally into the seas – 60% more than previous estimates. That’s a big problem. Scientists base their predictions about how much the Earth is warming by adding up all the excess heat that is produced by the known amount of greenhouse gases that have been emitted by human activities. This new calculation shows that far more heat than we thought has been going into oceans. But it also means that far more heat than we thought has been generated by the warming gases we have emitted. Therefore more heat from the same amount of gas means the Earth is more sensitive to CO2.

More heat means less oxygen in the water which could have implications for many species. Photo Victor Huang

More than 70 per cent of our planet’s remaining areas of wilderness are contained in just five countries and are at the mercy of political decisions regarding their future, new research has warned. Urgent international action is required to ensure the preservation of these last pockets of intact ecosystems, the study says, which calls for mandated conservation targets. The places where the greatest remaining tracts of wilderness containing mixes of species at near-natural levels of abundance were identified as being in Russia, Canada, Australia, the US and Brazil.

Produced by the University of Queensland (UQ) and the Wildlife Conservation Society (WCS), the study published in the journal Nature, says these areas are “increasingly important buffers against changing conditions… Yet they aren’t an explicit target in international policy frameworks.” The study also examines the huge future value these areas are likely to have for our planet. “They are also the only areas supporting the ecological processes that sustain biodiversity over evolutionary timescales,” it says. “As such, they are important reservoirs of genetic information, and act as reference areas for efforts to re-wild degraded land and seascapes.”

Professor James Watson, from UQ’s School of Earth and Environmental Sciences, said the work provides the first full global picture of how little wilderness remains, and he was alarmed at the results. “A century ago, only 15 per cent of the Earth’s surface was used by humans to grow crops and raise livestock,” he said. “Today, more than 77 per cent of land – excluding Antarctica – and 87 per cent of the ocean has been modified by the direct effects of human activities. It might be hard to believe, but between 1993 and 2009, an area of terrestrial wilderness larger than India – a staggering 3.3 million square kilometres – was lost to human settlement, farming, mining and other pressures.”

Everyone who’s asking “why did the stock market crash Monday?” is asking the wrong question. The real poser is “why did it take so long for this crash to happen?” The crash itself was significant—Donald Trump’s favorite index, the Dow Jones Industrial (DJIA) fell 4.6% in one day. This is about four times the standard range of the index—and so according to conventional economics, it should almost never happen. Of course, mainstream economists are wildly wrong about this, as they have been about almost everything else for some time now. In fact, a four% fall in the market is unusual, but far from rare: there are well over 100 days in the last century that the Dow Jones tumbled by this much. Crashes this big tend to happen when the market is massively overvalued, and on that front this crash is no different.

It’s like a long-overdue earthquake. Though everyone from Donald Trump down (or should that be “up”?) had regarded Monday’s level and the previous day’s tranquillity as normal, these were in fact the truly unprecedented events. In particular, the ratio of stock prices to corporate earnings is almost higher than it has ever been. There is only one time that it’s been higher: during the DotCom Bubble, when Robert Shiller’s “cyclically adjusted price to earnings” ratio hit the all-time record of 44 to one. That means that the average price of a share on the S&P500 was 44 times the average earnings per share over the previous 10 years (Shiller uses this long time-lag to minimize the effect of Ponzi Scheme firms like Enron).

The S&P500 fell more than 11% that day, so Monday’s fall is minor by comparison. And the market remains seriously overvalued: even if shares fell by 50% from today’s level, they’d still be twice as expensive as they have been, on average, for the last 140 years. After the 2000 crash, standard market dynamics led to stocks falling by 50% over the following two years, until the rise of the Subprime Bubble pushed them up about 25% (from 22 times earnings to 28 times). Then the Subprime Bubble burst in 2007, and shares fell another 50%, from 28 times earnings to 14 times. This was when central banks thought The End of the World Is Nigh, and that they’d be blamed for it. But in fact, when the market bottomed in early 2009, it was only just below the pre-1990 average of 14.5 times earnings.

Asian shares reversed their earlier gains on Wednesday as investors dumped U.S. stock futures for safer harbors, a sign market participants remain jittery after this week’s global markets rout. While most analysts believed this week’s distressed selling looks to have run its course for the moment, allowing volatility to abate a little, the prospect of monetary tightening across the globe remains a challenge for the long term. “If we look at some of the drivers of the recent volatility – the natural correction and the bond sell-off – we don’t foresee any of these factors contributing to a lengthy period of extreme volatility,” said Tom Kenny, senior economist at ANZ. “The correction is probably a healthy development and is not reflective of a souring of the macroeconomic outlook.”

Investors took their cues from a late rebound on Wall Street overnight, though many had an anxious eye on E-Mini futures for the S&P 500 which slipped about 1% in late Asian trading. Dow Minis were down 0.9%. MSCI’s broadest index of Asia-Pacific shares outside Japan was a tad softer, having risen as much as 2% in early trade. Japan’s Nikkei eased too but was still up 0.2%. Chinese blue chips and South Korea’s KOSPI index dropped more than 2%. “The only surprise about the current volatility is that it hasn’t happened sooner. Normally, even in a bull market, investors should expect a sell-off of 10-percent-plus at some point,” said Richard Titherington, chief investment officer of EM Asia Pacific Equities. “While a major market downturn is possible, it is not our current expectation. The underlying backdrop of an improving global economy, a weakening U.S. dollar and a pickup in global earnings all remain supportive factors.”

Two days after a sudden spike in volatility sparked a stock-market crash, market participants are left to ponder the wreckage of the sell-off and the mysterious dynamics that caused it. One theory that’s emerging: the curious case of the tail wagging the dog. Two exchange-traded products that democratized access to one of Wall Street’s most tried-and-true strategies – selling volatility – had just $3.6 billion in assets on Monday. That’s a tiny fraction of the roughly $2 trillion estimated to be linked to short-volatility strategies – and a speck of dust compared to the $23 trillion in market value of S&P 500 companies. Yet the popularity of these vehicles might have contributed to one of the most violent moves in U.S. equities in history: one that saw the Dow Jones Industrial Average slump more than 6% in a span of six minutes.

After the dust settled, the combined assets in the two exchange-traded products shrank to $135 million. One of them – the VelocityShares Daily Inverse VIX Short-Term ETN, known as XIV – will soon be extinct. No one knows for sure what played out on the afternoon of Feb. 5 on Wall Street, cautioned Societe Generale SA managing director Ramon Verastegui, but there’s reason to believe the sharpness of the retreat in equities was linked to traders’ understanding of how the exchange-traded products would behave. As funds’ assets swelled, so too had their power to move the underlying VIX futures markets, he suggests. And market participants knew it. Products such as XIV and its close relation, the ProShares Short VIX Short-Term Futures ETF (SVXY), aim to offer investors exposure to the inverse of the daily moves at the front portion of the VIX futures curve, and typically benefit from market tranquility.

Demand from leveraged VIX exchanged-traded products was “the major driver for the move post the cash close,” Barclays analysts led by Maneesh Deshpande said. There are other clues in the case — notably that the big fall in stocks hasn’t yet significantly affected other asset classes. That the volatility spike was concentrated in equities supports the notion of a VIX product-propelled plunge, according to George Pearkes, macro strategist at Bespoke Investment Group. During other eruptions of volatility — the aftermath of China’s shock devaluation of the yuan in August 2015, for instance – volatility in stocks, bonds, currencies and even oil jumped. “This is the exact opposite of a number of different volatility spikes we’ve seen in recent years,” he said in an interview on Bloomberg TV. “Frankly, it’s a reason to think that some of the worst of the recent moves in the VIX and the delta moves in cash equities have been driven specifically by equity-vol products that have not spread out to other asset classes.”

It was the hot trade on Wall Street, a seemingly sure thing that lulled everyone from hedge fund managers to small-time investors. Now newfangled investments linked to volatility in the stock market – until a few years ago, obscure niche products – have exploded in spectacular fashion. The shock waves have only just begun. How these investments proliferated is a classic story of Wall Street salesmanship and old-fashioned greed. In a few short years, financial engineering transformed expectations about the ups and downs of the stock market into an asset class that could be marketed and sold – as tradable as stocks but, it turns out, sometimes far riskier. Call it the volatility-financial complex. All told, financial players have created more than $8 billion of products tied to one index alone.

In a low-interest-rate world, investors desperate for returns snapped them up, and bankers collected fees along the way. But, as with mortgage investments a decade ago, complacency – in this case, over a history-defying period of market calm – masked potential dangers. No one is saying the wild swings of late presage a broad collapse like the one that hit in 2008. But the fallout nonetheless provides a glimpse into the myriad products, and growing complexity, driving global markets a decade after the last debacle. The risks, in hindsight, were clear enough even before the Dow Jones industrial average plummeted nearly 1,600 points on Monday, snapped back, and then took a wild bungee jump of nearly 1,200 points Tuesday. The CEO of Barclays, which pioneered notes linked to U.S. market volatility, warned only last month that investors might be losing their heads.

“If this thing turns, hold on to your hat,” Jes Staley told a panel at the World Economic Forum in Davos. Now, hats have been blown off by a whirlwind the likes of which Wall Street has never seen. To some, the volatility complex feels like a monster that’s been lurking in the shadows. Even one of the inventors of the VIX, Devesh Shah, is perplexed why these products exist in the first place. “Everybody knew that this was a huge problem,” said Shah, who was in his 20s when he helped create what’s become the market’s fear barometer. “Everybody knows that Inverse VIX is going to go to zero at some point, and all these inverse and leveraged products, not just in the VIX but elsewhere too, at the end of the day cost people a lot of money.”

Last year now-former FOMC Chair Janet Yellen downplayed the possibility of another financial crisis. In her hubris she believes the central banks have walled off the financial system from ‘contagion risks’ brought on by over-investment in synthetic derivative market products. Like generals, however, central planners are always fighting the last war. We’re experiencing a major correction in the equity markets brought on in a mean-reversion exercise thanks to central banks trying to shore up their defenses around the last battle they lost, namely off-exchange, unregulated CDOs — synthetic debt-based investment products. Humans are clever and will always find a way around a problem. The problem is incentives. he banks created CDO’s because there was a demand for investment returns far above what the central banks were allowing the market to pay, by setting interest rates well below the real risk profile of the investment community.

In other words, government bonds were over-priced and investors went looking for better returns. Now that Yellen et.al. have stamped out most of that market investors still need yield. And that’s where the equity markets and the VIX come in. The response to the 2008 financial crisis was zero-bound interest rates and trillions in liquidity created by the central banks sitting around looking for yield. It found its way into the equity markets which over the past six plus years been on an historic rally off the October 2011 low. During that time the VIX became more important. What was once only discussed by the real pros was now in the hands of everyone. Contagion risks jumped asset classes. For the uninitiated the VIX — or volatilty index — is a bet about the behavior of the S&P 500, itself an index of stocks. Higher VIX values equal higher implied future volatility in the S&P 500 and vice versa.

In mathematical terms the S&P 500 is the first derivative of any single stock. Stocks in the index trade in sympathy with it regardless of their current business. The VIX is then the 2nd derivative of any stock in your portfolio. During a rally the VIX falls. But, now with so many products out there, ETNs — Exchange Traded Notes — both leveraged and un-leveraged — to speculate in the VIX it became easier and more profitable to trade it than the S&P 500 or individual stocks. Trading volumes in these products have soared. The tail didn’t just wag the dog, it became the dog. Now these ETN’s are another derivative of the equity markets. And if they are leveraged, i.e. the note trades with twice or three times the volatility of the VIX itself (volatility of volatility), then options on these ETNs is the fourth derivative of the underlying stock. Volatilty of volatility of volatility.

Billionaire Carl Icahn told CNBC on Tuesday there are too many exotic, leveraged products for investors to trade, and one day these securities are going to blow up the market. The market is a “casino on steroids” with all these exchange-traded funds and exchange-traded notes, he said. These funds, especially the leveraged ones, are the “fault lines” that will eventually lead to an earthquake on Wall Street, he said. “These are just the beginnings of a rumbling.” The latest example is an obscure security, designed to be a bet on a calm market, that’s being blamed for causing an influx of selling in recent days. The VelocityShares Daily Inverse VIX Short-Term exchange-traded note (XIV) blew up overnight as investors were forced to sell when the market went haywire. As a result, Credit Suisse on Tuesday said as of Feb. 20, it will end trading for its XIV, which was supposed to give the opposite return of the Cboe Volatility Index (VIX), often referred to as the market’s fear gauge.

“The market itself is way over-leveraged,” Icahn said on “Fast Money Halftime Report,” predicting that “one day this thing is just going to implode.” He described the possible implosion as “maybe eventually worse than 1929,” making reference to the stock market crash that contributed to the Great Depression. “The market has become a much more dangerous place,” he said, adding the current volatility is a precursor of potential trouble. “It’s telling you something, giving you a warning.” Investors are piling into index funds thinking they’ll never go down, Icahn said. “Passive investing is the bubble right now, and that’s a great danger.” But as much as he was sounding alarm bells, Icahn said, “I don’t think this is the explosive time.” The market will “probably bounce back,” he continued. “I don’t think this is the beginning of the end.”

This is one for the record books. During Janet Yellen’s last week in office, the Dow dropped by 1,095 points or 4.1%. But by her lights, apparently, that wasn’t even a warning bell – just the market clearing its collective throat. So on the way out the door our Keynesian school marm could not resist delivering what will soon be seen as a grand self-indictment. There’s nothing to worry about, she averred, because Wall Street’s OK and main street is positively awesome: “I don’t want to label what we’re seeing as a bubble….(even if) asset valuations are generally elevated….(but) when I see the unemployment rate fall to 4.1%…I feel very good about the progress we’ve seen there.” No, there is a monumental bubble out there that was born, bred and nurtured at the hands of the Fed.

At the same time, Yellen and her merry band of money printers had virtually nothing to do with the 4.1% unemployment rate – even if that were a valid measure of return to full employment prosperity, which it is not. To the contrary, the mainstreet economy is sick as a dog, and it is the Fed’s giant Wall Street bubbles which made it so. That said, hereupon follows the ringing economic and financial indictment that Janet Yellen so richly deserves. In the first place, that Fed’s dangerous digression into massive QE and 100 months of near-ZIRP had virtually nothing to do with the limpid “recovery” that has transpired since the June 2009 bottom. And we do mean its contribution amounted to nothing – as in zero, zip and zilch.

[..] In general, our thesis is that central bank stimulus of household spending is equivalent to a one trick pony. Once all the latent headroom on household balance sheets and income statements to raise leverage levels is used up, cheap debt loses its efficacy in the main street economy. In fact, that is exactly what has happened. During the first 20-years of the Greenspan-incepted era of Bubble Finance, household leverage ratios exploded. Whereas wage and salary incomes rose by $4.2 trillion or 2.9X, household liabilities soared by nearly $12 trillion or 5.2X. Over the two decades, therefore, household leverage ratios (liabilities to earned income) nearly doubled from 124% to 224%.

Janet Yellen deserves exactly none of the adulation being conferred upon her tenure by the mainstream financial press. In fact, her reign will be judged by history as a spectacular failure that left main street high and dry—even as it finally and completely addicted Wall Street to the toxic monetary heroin that is the specialty of Keynesian central bankers. Accordingly, it may take a dozen or more episodes like the 12% crash of the last few days to finally purge the “buy the dips” addiction that is rampant in the casinos. Pending that day of deliverance, however, the soon-to-be shaking and shivering cold turkeys of Wall Street will surely come to see that Opioid Janet was not their friend at all, but their very worst nightmare.

[..] much of the mischief, madness and reckless speculation now implanted in the global financial markets happened during the Yellen-enabled global QE phase of 2014-2018. During that period, for example, corporate debt issuance set all-time records. But as we documented in Part 1, the proceeds went into financial engineering and bidding up the price of existing shares to ludicrous heights, not new growth capital. Likewise, carry trade speculation by front-runners went to mindless extremes, such as the fact that the Italian 10-year note traded under 1.0% during points in 2016. The facts that Italy’s public debt stood at 133% of GDP, that its political system was completely broken and dysfunctional and that its economy was 10% smaller than it had been earlier in this century were irrelevant to the price of its debt.

The latter was being set by front-running speculators who were buying on massive repo leverage what the idiot central banker, Mario Draghi, promised them he would be buying, too. Indeed, as Yellen dithered, deferred, ducked and delayed the urgent imperative of monetary normalization at the Fed, the other lesser central banks were given leave to expand their collective balance sheets at a stupendous $2.2 trillion annual rate during much of 2016-2017. With two massive central bank vaults swinging their doors wide open, it’s no wonder that upwards of $15 trillion of sovereign debt traded with a negative yield during the peak of the madness.

And that wasn’t the half of it. By killing the yield on sovereigns, Yellen and her convoy of Keynesian central bankers forced money managers into what will soon be evident as crazy-ass risk taking in order to scrape-up a semblance of yield. Not only did European junk bonds trade inside the UST 10-year yield at one point, but the corporate bond market was literally primed for an explosion of issuance by fund managers desperate for returns. The proceeds, of course, went almost entirely into funding giant, pointless M&A deals, stock buybacks and other forms of debt-financed recapitalization.

here are two European Unions, it seems. There is the EU that stands up for the citizen, for his or her rights; the EU that can face down the behemoths of global capitalism and rein in their avarice and callousness; the EU that has legally enshrined workers’ freedoms, and which exists as a bulwark against untrammelled neoliberalism. And then there is the real EU. That heroic EU is a castle in the anti-Brexit sky, built by those who identify themselves as left-wing. It is maintained by those Labour MPs and peers who, as they did on the eve of Labour’s autumn conference, ceaselessly urge Labour leader Jeremy Corybn ‘to commit to staying in the Single Market and Customs Union… and to work with sister parties and others across Europe to improve workers’ rights’.

It is fortified by the self-appointed keepers of the left-wing flame, those among the commentariat who never tire of telling us that ‘workers’ rights… would be imperilled’ by a so-called ‘Hard Brexit’. And it is peopled by all those who cling to this image of the EU as an essentially social-democratic institution, sticking it gently to the man, defying the Daily Mail, and protecting working men and women against the inhuman workings of capital. Then there’s the other EU, the one that actually exists. This is the EU that uses the pooled-without-consent sovereignty of its member states to pursue its own institutional self-preservation, impoverishing struggling Eurozone members, from Spain to Italy, in the name of economic stability; imposing leaders-cum-administrators on recalcitrant electorates in the interests of austerity; and brazenly betraying workers’ rights at every self-interested turn.

This EU – the actual EU, the one stubbornly committed to its own, not citizens’, interests – is not on the side of the worker. And it never was. Because this EU, when the economic imperative demands, is always against the worker. But those attached to their fantasy left-wing ideal of the EU refuse to see the reality. To face up to this reality would simply be too much. It would mock their left-wing pretensions, humiliate and expose them for what they are: a craven defence of the status quo – a status quo in which they have long prospered. This is presumably why so little attention has been given to what happened in Greece last month, when the real EU was there for all to see. The EU forced the Syriza-led government of Alex Tsipras to implement new anti-union legislation, rendering strike action illegal unless over 50% of union members have formally approved it. The effect of such a measure, as the British trade-union movement discovered in the 1980s, will be to strangle workers’ freedoms in bureaucracy, and emasculate organised labour.

A hard-fought deal on pay and working hours for industrial employees in southwestern Germany sets a benchmark for millions of workers across Europe’s largest economy and heralds wage growth in the coming years. The agreement between labour union IG Metall and the Suedwestmetall employers’ federation, struck overnight, foresees a 4.3% pay raise from April and other payments spread over 27 months. Tough pay negotiations are expected to end years of wage restraint in Germany, potentially aiding the ECB as it tries to get euro zone inflation back up to the bank’s target rate of just below 2%. On an annual basis, the agreement is equivalent to a 3.5% increase in wages, according to Commerzbank analyst Eckart Tuchtfeld, well below IG Metall’s initial demand for a 6% hike over 12 months, but was still seen as a good deal.

“The agreed pay rises, and accompanying measures, are at the top end of expectations and should result in annual wage increases of close to 4% over the next couple of years,” Pictet economist Frederik Ducrozet said. The “pilot” deal, struck against a backdrop of a strong economic recovery and the lowest unemployment since German unification in 1990, covers half a million employees in southwestern Germany, home to industrial powerhouses like car maker Daimler. It is expected to be applied in the rest of Germany as well and is likely to influence negotiations in other industries.

Germany’s second-biggest union, Verdi, is due to publish its wage demand for public sector workers on Thursday. Verdi and IG Metall together account for about 15% of the German workforce. IG Metall’s deal will reinforce market expectations for the ECB to dial back stimulus further this year as growth in the bloc is now self generating and wages are moving slowly upwards. It comes as world stock and bond markets are selling off on fears that a jobs bonanza in the United States may force early interest rate hikes there. But the euro zone outlook is much different with the jobless rate still at almost 9% and the broader slack, which includes part-time and temporary workers, perhaps twice as high, economists say.

Farmers say they can’t get people to harvest their crops. Question: have you tried raising their wages enough? Something tells us if you pay them well, they will be glad to come work. Something also tells us you haven’t done that. You may say: that makes my products uncompetitive, but that’s another discussion altogether.

Also: the article says “Enough broccoli to feed 15,000 people for a year was wasted..” on that farm. And: the farmer’s loss was “between £30,000 and £50,000.” Does that mean he can feed people for £2 a year? £3? It certainly reads that way.

British farmers have been forced to leave thousands of pounds worth of vegetables to rot in their fields, because of a drop in the number of farm workers from the EU. James Orr, whose farm outside St Andrews produces potatoes, carrots, parsnips, broccoli, cauliflower, said his farm suffered a 15% drop in the number of workers between August and November. “We simply could not harvest everything, and as a result we left produce in the field to rot,” he told Scotland’s Sunday Herald newspaper. Enough broccoli to feed 15,000 people for a year was wasted, he added. Mr Orr’s farm supplies more than 1,000 tones of the vegetable and he estimated he lost between £30,000 and £50,000.

The UK farming industry is heavily dependent on pickers from the EU, particularly those from eastern Europe. Britain’s low unemployment rate and the the seasonal nature of the work makes it difficult to attract domestic workers. But the fall in the value of sterling against the Euro since the Brexit vote, means the UK has become less attractive to seasonal workers from Romania and Bulgaria. Farmers also fear that a Brexit deal restricting freedom of movement could leave them with even fewer people to help harvest their crops. [..] NFU Scotland President Andrew Mr McCornick told the Herald access to workers was a key priority for the industry. “This year, there has been a shortage of between 10 and 20% of seasonal workers coming from the EU,” he said. It was essential a scheme was introduced in 2018 that would provide work permits for up to 20,000 workers from outside the EU, he added.

Migrant and refugee arrivals onto Greek shores have doubled since August 20 to reach as many as 180 people a day in clement weather, Migration Policy Minister Yiannis Mouzalas said on Tuesday. The increase in arrivals from Turkey has resulted “in a bad situation again” on the islands of the eastern Aegean that host migrant reception and processing centers, Mouzalas admitted, saying that the ministry is trying to improve conditions at overcrowded and under-resourced facilities. Speaking on Thema radio, Mouzalas accused the European Union of contributing to the problem by failing to honor its commitments to Turkey in a deal for that country to take back asylum seekers whose applications are rejected and to crack down on migrant trafficking from its shores.

Mouzalas was also critical of what he described as contradictory reactions from local authorities and communities on the affected islands. “On the one hand, they prevent moves to improve conditions and on the other they are hysterical about dissolving the deal with Turkey at any cost so as to transfer the migrants to the mainland,” Mouzalas said, referring to reactions toward ministry plans for increasing the number of housing units at certain island camps. “Whoever says that emptying the islands will improve the situation is wrong,” Mouzalas said, reiterating concerns that moving all migrants and refugees to the mainland will simply encourage more arrivals. “In 2017, we transferred 27,000 people to the mainland and 19,000 arrived on the islands,” he added.

Another great set of graphs from Lance Roberts, who just keep churning them out. I picked these two to show how dependent economies have become on suppressing wages. Problem is, that threatens economies. You need money rolling at the ground level to keep your economy going.

Since 2000, each dollar of gross sales has been increased to more than $1 in operating and reported profits through financial engineering and cost suppression. The next chart shows that the surge in corporate profitability in recent years is a result of a consistent reduction of both employment and wage growth. This has been achieved by increases in productivity, technology, and off-shoring of labor. However, it is important to note that benefits from such actions are finite. (Note the acceleration in profits starting with the Reagan Tax Cuts in the 1989’s. There is no evidence that cutting taxes for corporations leads to higher wages for employees.)

Given the economic landscape of recent years, large offsetting sectoral deficits and surpluses are not surprising, but they should not be taken as evidence that the long-term profitability of the corporate sector has permanently shifted higher. Stocks are not a claim to a few years of cash flows, but decades and decades of them. By pricing stocks as if current profits are representative of the indefinite future, investors have ensured themselves a rude awakening over time. Equity valuations are decidedly a long-term proposition, and from present levels, the implied long-term returns are quite dim.

The good news: total mortgage debt has decreased since 2008, to $8.743 trillion from $9.29 trillion, but as of the third quarter of 2017, still accounts for 67.5% of overall consumer debt. The bad news: since 2008, the growth in total debt has been attributable to the auto loan and student loan sectors. Auto loan debt has increased by 50% since 2008, to slightly over $1.2 trillion from approximately $800 billion. The most dramatic growth rate, as Zero Hedge readers know well, has been in student loan debt which has grown by 122% since 2008, to $1.357 trillion from $611 billion. But a bigger concern flagged by DBRS is that the growth in consumer debt is raising concerns when viewed in the context of the existing wage stagnation hampering the current economic environment.

The rating agency cites a paper published in October 2017 by the Harvard Business Review which stated that the inflation-adjusted hourly wage has grown by only 0.2% per year since the mid-1970s and labor’s share of income has decreased to its current level of 57% from 65%. Meanwhile, in the second quarter of 2017, wages were only 5.7% higher than they were a decade earlier. In comparison, the Federal Reserve Bank of New York/Equifax data shows that consumer debt growth over the same period was 9.3%. In other words, the purchasing power of US households has been largely a function of rapidly rising debt, which over the past decade has risen 60% faster than wages. There is another concern: while overall delinquency rates have stabilized in recent years, the one stubborn outlier remains student debt, where 90+ day delinquencies have risen to more than 10%.

A recurring pattern of the past few decades involves governments promising to limit their borrowing, only to discover that hardly anyone cares. So target dates slip, bonds are issued, and the debts keep rising. This time around the timing is especially notable, since eight years of global growth ought to be producing tax revenues sufficient to at least moderate the tide of red ink. But apparently not. In Japan, for instance, government debt is now 250% of GDP, a figure which economists from, say, the 1990s, would have thought impossible. Over the past decade the country’s leaders have proposed a series of plans for balancing the budget, and actually did manage to shrink debt/GDP slightly in 2016. But now they seem to have given up, and are looking for excuses to keep spending.

[..] To put the above in visual terms, here’s an infographic from Howmuch.com that shows per-capita government debt for the world’s major countries. Note that a Japanese family of five’s share of its government’s debt is close to $450,000 while in the US a similar family owes $300,000. That’s in addition to their mortgages, car loans, credit cards, etc. Obviously debts of this magnitude can’t and therefore won’t be repaid. Which means the coming decade will be defined by how — and how quickly — we end up defaulting.

The lemmings are now in full stampede toward the cliffs. You can literally hear the cold waters churning, foaming and crashing on the boulders far below. From bitcoin to Amazon, the financials, the Russell 2000 and most everything else in between, the casinos are digesting no information except the price action and are relentlessly rising on nothing more than pure momentum. The mania has gone full retard. Certainly earnings have nothing to do with it. As of this morning, the Russell 2000, for instance, was trading at 112X reported LTM earnings. Likewise, Q3 reporting is all over except for the shouting and reported LTM earnings for the S&P 500 came in $107 per share. That’s of signal importance because fully 36 months ago, S&P earnings for the September 2014 LTM period posted at $106 per share.

That’s right. Three years and $1 of gain. They talking heads blather about “strong earnings” only because they think we were born yesterday. What happened in-between, of course, was the proverbial pig passing through the python. First, the global oil, commodities and industrial deflation after July 2014 took earnings to a low of $86.44 per share in the March 2016 LTM period. After that came the opposite—the massive 2016-2017 Xi Coronation Stimulus in China. The new Red Emperor and his minions pumped out an incredible $6 trillion wave of new credit, thereby artificially stimulating a global rebound and a profits recovery back to where it started three years ago.

The difference of course is that $106 of earnings back then were priced at an already heady (by historical standards) 18.6X, whereas $107 of earnings today are being priced at a truly lunatic 24.6X. After all, nothing says earnings bust ahead better than an aging business cycle, a cooling Red Ponzi, an epochal shift toward central bank QT (quantitative tightening) and a massive Washington Fiscal Cliff. Yet every one of those headwinds are self-evident and have made their presence known with a loud clang in the last few days.

As far as Brexit headaches go, John McFarlane, who chairs Barclays and London’s bank lobby, says that while his firm is on top of job moves, he’s more concerned about rewriting “hundreds of thousands” of contracts. He’s not alone. Andrew Bailey, head of the U.K. Financial Conduct Authority, said “contract continuity” was among the biggest potential disruptions from a no-deal, no-transition Brexit. Both men were testifying to lawmakers Wednesday. Bank of England Governor Mark Carney and ECB President Mario Draghi have also expressed concern about the issue and the dearth of time left for a fix. A week ago, data from the European Banking Authority showed the scope of the issue, and that money is already on the move for precisely this reason: European banks have slashed their U.K. assets by $425 billion, driven by a 35% drop in derivatives exposures.

Insurance policies are affected too: Carney estimates about 20 billion pounds of insurance liabilities in Britain could be affected without swift action. The issue arises because one side or the other of a contract can meet its obligations only thanks to an authorization that’s set to disappear once the U.K. leaves the European Union in 2019. This might result in a firm being obliged by contract law to do something that regulation prohibits it from carrying out, and impossibility generally isn’t a defense against non-performance of a contract, said Simon Gleeson at Clifford Chance in London. “A bank which enters into a contract which becomes illegal to perform by reason of Brexit may well be liable in damages for its non-performance to the counterparty,” said Gleeson. “Dealing with this is so much in everyone’s interest that I’m amazed it hasn’t been addressed.”

[..] Cross-border revolving credits – credit lines that can be drawn down, repaid, then drawn down again – are among such contracts. Many of these are issued to EU companies by syndicates with members based in the U.K. For example, lenders to Volkswagen Financial Services’s €2.5 billion ($3 billion) line include London-based entities for Bank of America and Citigroup, as well as the U.K. units of the major British banks, data compiled by Bloomberg show. A lender that lost its authorization but made an advance to the company under the revolver might find itself in breach of local law in jurisdictions including Germany and France, according to Clifford Chance. On the other hand, it might be in breach of contract if it failed to make the loan.

This week, Morgan Stanley claimed that “Corbyn would be more of a danger to markets than hard Brexit”, something which I saw as supremely ironic. Because the actions of Morgan Stanley, and others like it, laid the foundations for Leave because of their role in the financial crisis: a crisis of capitalism, which ushered in seven years of austerity, falling wages and insecure work. Precisely the conditions that would encourage the majority of British people to vote against the status quo and opt for Leave. Morgan Stanley’s role in the financial crisis cannot be understated; and, given describing things as a “danger to markets” appears to be in fashion right now, let’s remind ourselves what they got up to just over a decade ago.

Essentially, they packaged up sub-prime mortgages as something called Collateralised Debt Obligations (CDOs), got credit ratings agencies – who were entirely conflicted as their clients were the investment banks – to rate these absolute garbage CDOs triple-A investments. Morgan Stanley then misled investors who bought them. Because they knew what those investments were actually worth, Morgan Stanley’s traders bought what are known as “credit default swaps” on those CDOs – effectively amounting to a bet on it defaulting. You can buy or sell a credit default swap even if you don’t own the investment. They did this thousands of times.

[..] the right-wing press, which gleefully reported on this Corbyn/Brexit warning, clearly has a short memory about what really happened. After all, the lie that Labour caused the financial crisis, and not investment banks like Morgan Stanley, was a convenient pretext for maintaining the economic status quo while cutting to public spending. This forced ordinary working people to pay for a financial crisis they did not cause. It’s little wonder that people voted Leave having been totally shafted by the system. But the opportunity to do so only arose because the narrative that “Labour crashed the economy” helped secure David Cameron a majority in 2015 on a manifesto that promised a referendum.

Senate Majority Leader Mitch McConnell said votes on the tax bill will resume at 11 a.m. on Friday as the collapse of a key compromise to win a majority for a Senate tax overhaul left Republicans scrambling to salvage the legislation. Debate over the bill may continue into the evening, McConnell said. It’s unclear when the unlimited amendment vote series known as “vote-a-rama” would begin. After seeming to gain momentum during the day, the GOP’s tax cut plan smacked into a decision from the Senate’s rule-making office that said a so-called trigger proposed by GOP holdouts didn’t pass procedural muster. At least three Republicans – Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma – had tied their votes to the mechanism, which would have increased taxes if revenue targets weren’t met.

The trio is now demanding that leaders agree to other changes in the bill to avoid a huge deficit increase. Republicans have a slim majority in the Senate and can only afford to lose two members if they want to pass the tax bill without Democratic support. Adding to the difficulty was a ruling by a key fiscal referee that the tax plan would blow a $1 trillion hole in the nation’s debt – even after accounting for economic growth. The day’s events left GOP leaders contemplating a variety of potentially unpalatable measures — including making some tax cuts on the individual and corporate side end within six or seven years. The current version of the Senate bill would sunset individual breaks in 2026.

Australia’s banks will be subject to a wide-ranging public inquiry after Prime Minister Malcolm Turnbull bowed to pressure to address scandals besetting the industry. The yearlong royal commission will examine the conduct of the nation’s banks, insurers, financial services providers and pension funds, and consider whether regulators have enough power to tackle misconduct, Turnbull said Thursday. He pledged the inquiry would not put “capitalism on trial.” The announcement came just minutes after Commonwealth Bank of Australia, Australia & New Zealand Banking, Westpac and National Australia Bank dropped their opposition to an inquiry, saying in an open letter to the government that months of political squabbling over the issue risked undermining offshore investor confidence.

More than A$8 billion ($6 billion) was wiped off the market value of the big four lenders in early Sydney trading, with Commonwealth Bank declining as much as 2.7%. “Ongoing speculation and fear-mongering about a banking inquiry or royal commission is disruptive and risks undermining the reputation of Australia’s world-class financial system,” Turnbull said. The inquiry will “further ensure our financial system is working efficiently and effectively.” The main opposition Labor party has for months been demanding a royal commission into the finance industry, amid a string of scandals ranging from misleading financial advice, attempted rate-rigging and alleged breaches of anti-money laundering laws. Pressure was growing on Turnbull to hold an inquiry, with some lawmakers in his Liberal-National coalition threatening to force a vote in parliament next week.

A controversial Turkish-Iranian gold trader has told a US court that Turkish President Recep Tayyip Erdogan personally approved his sanction-breaking deals with Iran. Reza Zarrab, 34, is a key witness in the criminal trial of a Turkish banker whom he allegedly worked with to help Iran launder money. Mr Erdogan has denied that Turkey breached US sanctions on Iran. The case has strained relations between Ankara and Washington. In his testimony, Mr Zarrab implicated Mr Erdogan in an international money laundering scheme that he and the banker, Mehmet Hakan Atilla, ran between 2010 and 2015 that allegedly allowed Iran to access international markets despite US sanctions.

He said that he was told in 2012 by the then economy minister that Mr Erdogan, who was prime minister at the time, had instructed Turkish banks to participate in the multi-million dollar scheme. Mr Erdogan said earlier on Thursday that Turkey did not breach US sanctions on Iran, Turkish media report. His government has described the case as “a plot against Turkey”. The Turkish president is yet to respond to the new allegations about him made in court. Mr Atilla has pleaded not guilty. Nine people have been charged in total. Mr Zarrab was arrested by US officials in 2016 and accused of engaging in hundreds of millions of dollars’ worth of transactions on behalf of the Iranian government, money laundering and bank fraud. But he decided to cooperate with prosecutors and is now their star witness in the New York trial.

On Wednesday, he told the court he paid Zafer Caglayan, then Turkey’s economy minister, bribes amounting to more than €50m to facilitate deals with Iran. Turkey’s Deputy Prime Minister, Bekir Bozdag, responded to the allegations, saying that Mr Zarrab had been “pressured into committing slander”. Speaking to state-run news agency Anadolu, Mr Bozdag called the trial a “theatre”. The Turkish government had previously said that Mr Caglayan acted within Turkish and international law.

The 19th Chinese Communist Party Congress made it clear that the New Silk Roads – aka, the Belt and Road Initiative (BRI) – launched by President Xi Jinping just four years ago, provides the concept around which all Chinese foreign policy is to revolve for the foreseeable future. Up until the symbolic 100th anniversary of the People’s Republic of China, in 2049, in fact. Virtually every nook and cranny of the Chinese administration is invested in making the BRI Grand Strategy a success: economic actors, financial players, state-owned enterprises (SOEs), the private sector, the diplomatic machine, think tanks, and – of course – the media, are all on board. It’s under this long-term framework that sundry BRI projects should be examined. And their reach, let’s be clear, involves most of Eurasia – including everything from the Central Asian steppes to the Caucasus and the Western Balkans.

Representatives of no fewer than 50 nations are currently gathered in Tbilisi, Georgia, for yet another BRI-related summit. The BRI masterplan details six major economic “corridors,” and one of these is the Central Asia-West Asia Economic Corridor. That’s where Georgia fits in, alongside neighboring Azerbaijan: both are vying to position themselves as the key Caucasus transit hub between Western China and the European Union. [..] The action in the Caucasus was mirrored in Europe earlier in the week as Chinese Premier Li Keqiang and Hungary’s Prime Minister Viktor Orban opened the sixth “16+1” summit, involving China and 16 Central and Eastern European nations, in Budapest. “16+1” is yet another of those trademark Chinese diplomatic “away wins.”

Some of these nations are part of the EU, some part of NATO, some neither. From Beijing’s point of view, what matters is the relentless BRI infrastructure and connectivity drive. Beijing may have invested as much as US$8 billion so far in Central and Eastern Europe. China is having a ball in the Western Balkans – especially in Serbia, in Montenegro, and in Bosnia and Herzegovina, where EU financial muscle is absent. China has invested in multiple connectivity and energy projects in Serbia – including the much-debated Belgrade-Budapest high-speed rail link. Construction of the Serbian stretch started this week, with 85% of the total cost (roughly €2.4 billion) coming from the Export-Import Bank of China.

France’s current zone of influence in Africa is the result of the policies of President Charles de Gaulle, who was unable to come to terms with his defeats in Indochina (1954) and Algeria (1962) and therefore sought to achieve the dominance of France in his former colonies. After de Gaulle, however, other presidents did not refrain from using military force and violence in Africa to defend their interests, on the pretext of protecting human rights and democracy. The French often achieved the opposite, because they made the same mistakes in their military actions as Americans made elsewhere in the world: they supported people who later became their enemies or violated human rights.

For example, it was the regime of Juvenal Habyariman in Rwanda that was supported by Paris: the French supplied Hutu combat groups with weapons, thus contributing to the Tutsi massacre. Hollande, who in Paris and Europe was perceived as a weakling, showed the face of a warrior and sent heavy units and fighter planes to Mali in 2013. This would not have been necessary if French President Sarkozy and the USA had not overthrown Qaddafi. It was Sarkozy that initiated the NATO led airstrikes against Libya. The removal of Colonel Qaddafi gave rise to the creation of the Caliphate with the help of Tuaregs in the north of Niger and Mali. After a few years since the start of the mission in Mali one wonders: has it made Europe safer?

Has the flow of migrants been stopped through Sahel countries? Are the Jihadists of African descent a lesser threat in Europe? The cost of the military action in Mali in 2013 amounted to €650 million. Operation Barkhane (as it is called) continues to this day and costs the French budget €500 million per year. Of course, democracy in Mali is a top priority for most Europeans, right? A total of 9,000 French soldiers are currently stationed in Chad, Niger, Mali, Burkina Faso, Senegal, Gabon, the Central African Republic and Djibouti. The growing military presence is intended to support the fight against terrorism and crime, in fact it is about the French elites extending their power to the south, reaching for cheap raw materials and outlet markets.

Scientists have detected cosmic ray energy readings that could bring them closer to proving the existence of dark matter, a mysterious substance believed to comprise a quarter of our universe, a study revealed on Thursday. Likely made up of unknown sub-atomic material, dark matter is invisible to telescopes and can be perceived only through its gravitational pull on other objects in the universe. Beijing’s first astronomical satellite launched two years ago detected 1.5 million cosmic ray electrons and protons, the study said, and unprecedented measurements found curiously low-energy rays. The team of researchers from China, Switzerland and Italy, who published their first results in the journal Nature, said the data may cast light on “the annihilation or decay of particle dark matter”.

“This new unseen phenomena can bring breakthroughs,” Bai Chunli, president of the Chinese Academy of Sciences, said at a briefing. “After collecting more data, if we can identify it is dark matter for sure then that is very significant. And if not, it is even more significant because they would be fresh new particles that no one had predicted before,” Bai added, to applause from fellow scientists. The Dark Matter Particle Explorer (DAMPE) is now collecting more data from space to help researchers figure out what it could be. DAMPE was launched from the Jiuquan Satellite Launch Centre in the Gobi desert in December 2015, after nearly 20 years in development. Its designers boast that DAMPE is superior to its US counterpart, the AMS-02 (Alpha Magnetic Spectrometer) that NASA installed on the International Space Station in 2011.

“Our cosmic ray detection range is 10 times that of AMS-02 and three times as accurate,” said DAMPE chief scientist Chang Jin. “Proving the existence of dark matter takes a lot of time. Now we have worked out the most precise spectrum, but we are not 100% sure that this can lead us to the location of dark matter,” he said.

The amount of monetary stimulus increasingly imposed on the financial system creates false signals about the economy’s true growth rate, causing a vast misallocation of capital, impaired productivity and weakened economic activity. To help quantify the amount of stimulus, please consider the graph. Federal Reserve (Fed) monetary stimulus comes in two forms. First in the form of targeting the Fed Funds interest rate at a rate below the nominal rate of economic growth (blue). Second, it stems from the large scale asset purchases QE) by the Fed (orange). When these two metrics are quantified, it yields an estimate of the average amount of monetary stimulus (red) applied during each post-recession period since 1980. It has been almost ten years since the 2008 financial crisis and the Fed is applying the equivalent of 5.25% of interest rate stimulus to the economy, dwarfing that of prior periods.

The graph highlights that the Fed has been increasingly aggressive in both the amount of stimulus employed as well as the amount of time that such monetary stimulus remains outstanding. Amazingly few investors seem to comprehend that despite the massive level of monetary stimulus, economic growth is trending well below recoveries of years past. Additionally, as witnessed by historically high valuations, the rise in the prices of many financial assets is not based on improving economic fundamentals but simply the stimulative effect that QE and low interest rates have on investor confidence and financial leverage. Now consider the ramifications of a Fed that continues to increase the Fed Funds rate and moves forward with plans to slowly remove QE.

First, the calculation of disposable personal income, income less taxes, is largely a guess and very inaccurate due to the variability of income taxes paid by households. Secondly, but most importantly, the measure is heavily skewed by the top 20% of income earners, needless to say, the top 5%. As shown in the chart below, those in the top 20% have seen substantially larger median wage growth versus the bottom 80%.

Lastly, disposable incomes and discretionary incomes are two very different animals. Discretionary income is what is left of disposable incomes after you pay for all of the mandatory spending like rent, food, utilities, health care premiums, insurance, etc. According to a Gallup survey, it requires about $53,000 a year to maintain a family of four in the United States. For 80% of Americans, this is a problem even on a GROSS income basis.

This is why record levels of consumer debt is a problem. There is simply a limit to how much “debt” each household can carry even at historically low interest rates. It is also the primary reason why we can not have a replay of the 1980-90’s. “Beginning 1983, the secular bull market of the 80-90’s began. Driven by falling rates of inflation, interest rates, and the deregulation of the banking industry, the debt-induced ramp up of the 90’s gained traction as consumers levered their way into a higher standard of living.”

“While the Internet boom did cause an increase in productivity, it also had a very deleterious effect on the economy. As shown in the chart above, the rise in personal debt was used to offset the declines in personal income and savings rates. This plunge into indebtedness supported the ‘consumption function’ of the economy. The ‘borrowing and spending like mad’ provided a false sense of economic prosperity. During the boom market of the 1980’s and 90’s consumption, as a%age of the economy, grew from roughly 61% to 68% currently. The increase in consumption was largely built upon a falling interest rate environment, lower borrowing costs, and relaxation of lending standards. (Think mortgage, auto, student and sub-prime loans.) In 1980, household credit market debt stood at $1.3 Trillion. To move consumption, as a% of the economy, from 61% to 67% by the year 2000 it required an increase of $5.6 Trillion in debt. Since 2000, consumption as a% of the economy has risen by just 2% over the last 17 years, however, that increase required more than a $6 Trillion in debt.

Despite all the happy talk about “recovery” and higher growth, wages have gone nowhere since 2000–and for the bottom 20% of workers, they’ve gone nowhere since the 1970s. GDP has risen smartly since 2000, but the share of GDP going to wages and salaries has plummeted: this is simply an extension of a 47-year downtrend. [..] .. our system requires ever-higher household incomes to function–not just in the top 5%, but in the top 80%. Our federal social programs–Social Security, Medicare and Medicaid–are pay-as-you-go: all the expenditures this year are paid by taxes collected this year. As I have detailed many times, the so-called “Trust Funds” are fictions; when Social Security runs a deficit, the difference between receipts and expenses are filled by selling Treasury bonds in the open market–the exact same mechanism ther government uses to fund any other deficit.

The demographics of the nation have changed in the past two generations. The Baby Boom is retiring en masse, expanding the number of beneficiaries of these programs, while the number of full-time workers to retirees is down from 10-to-1 in the good old days to 2-to-1: there are 60 million beneficiaries of Social Security and Medicare and about 120 million full-time workers in the U.S. Meanwhile, medical expenses per person are soaring. Profiteering by healthcare cartels, new and ever-more costly treatments, the rise of chronic lifestyle illnesses–there are many drivers of this trend. There is absolutely no evidence to support the fantasy that this trend will magically reverse.

Costs are skyrocketing and the number of retirees is ballooning, but wages are going nowhere. Do you see the problem? All pay-as-you-go programs are based on the assumption that the number of workers and the wages they earn will both rise at a rate that is above the underlying rate of inflation and equal to the rate of increase in pay-as-you-go programs. If 95% of the households are earning less money when adjusted for inflation, and their wealth has also declined or stagnated, then how can we pay for programs which expand by 6% or more every year? The short answer is you can’t.

Travelers and fuel suppliers across the United States braced for higher prices and shortages ahead of the Labor Day holiday weekend as the country’s biggest fuel pipelines and refineries curb operations after Hurricane Harvey. Just six days after Harvey slammed into the heart of the U.S. energy industry in Texas, the effects are being felt not just in Houston, but also in Chicago and New York, and prices at the pump nationwide have hit a high for the year. Supply shortages have developed even though there are nearly a quarter of a billion barrels of gasoline stockpiled in the United States. But much of it is held in places where it cannot be accessed due to massive floods, or too far away from the places it is needed. Some of it is unfinished, meaning it needs to be blended before it can go to gas stations.

Harvey has highlighted another weakness in the system: pipeline terminals typically only have a five-day supply in storage to load into the lines. Some of the biggest pipelines in the United States, supplying the northeast market and the Chicago area, have already shut down or reduced operations because they have no fuel to pump. “Gasoline is very much a ‘just-in-time’ fuel, for as many million barrels as they think we have,” said Patrick DeHaan, petroleum analyst at GasBuddy. “Sure, they are somewhere, but they still have to be mixed and blended together.” At least two East Coast refiners, including Philadelphia Energy Solutions and Irving Oil, have already run out of gasoline for immediate delivery as they have rushed to send supplies to the U.S. Southeast, Caribbean, Mexico and South America to offset the lack of exports since Harvey.

The scope of Wells Fargo’s fake accounts scandal grew significantly on Thursday, with the bank now saying that 3.5 million accounts were potentially opened without customers’ permission between 2009 and 2016. That’s up from 2.1 million accounts that the bank had cited in September 2016, when it acknowledged that employees under pressure to meet aggressive sales targets had opened accounts that customers might not have even been aware existed. People may have had different kinds of accounts in their names, so the number of customers affected may differ from the account total. Wells Fargo said Thursday that about half a million of the newly discovered accounts were missed during the original review, which covered the years 2011 to 2015.

After Wells Fargo acknowledged the fake accounts last year, evidence quickly appeared that the sales practices problems dated back even further. So Wells Fargo hired an outside consulting firm to analyze 165 million retail bank accounts opened between 2009 and 2016. Wells said the firm found that, along with the 2.1 million accounts originally disclosed, 981,000 more accounts were found in the expanded timeline. And roughly 450,000 accounts were found in the original window. The scandal was the biggest in Wells Fargo’s history. It cost then-CEO John Stumpf his job, and the bank’s once-sterling industry reputation was in tatters. The company ended up paying $185 million to regulators and settled a class-action suit for $142 million. New managers have been trying to amends with customers, politicians and the public.

But it’s been tough, as new revelations keep coming. Wells Fargo said last month that roughly 570,000 customers were signed up for and billed for car insurance that they didn’t need or necessarily know about. Many couldn’t afford the extra costs and fell behind in their payments, and in about 20,000 cases, cars were repossessed. Other customers have filed lawsuits against Wells Fargo saying they were victims of unfair overdraft practices. Wells Fargo is also still under several investigations for its sales practices problems, including a congressional inquiry and one by the Justice Department. Wells Fargo said Thursday that of the 3.5 million accounts potentially opened without permission, 190,000 of those incurred fees and charges. That’s up from 130,000 that the bank originally said. Wells Fargo will refund $2.8 million to customers, in addition to the $3.3 million it already agreed to pay.

Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, as the fund is known, says the heyday of cross-border trade is probably behind us. “The question investors are asking themselves is if the easy wins already have been made,” Slyngstad said in an Aug. 29 interview from his office on the top floor of Norway’s central bank in Oslo. “The global supply chains have in a way had a one-time gain primarily through outsourcing of multinationals to China.” Norway’s wealth fund owns 1.3% of globally listed stocks, spread out over almost 80 countries. And with interest rates at record lows, the investor has cut its long-term return expectations to about 3% from 4%, even after winning approval from parliament to raise its share of equities to 70% from 60%.

Slyngstad, who became CEO in 2008 just as the global economy was sinking into the worst crisis since the Great Depression, noted that back then the fund rode out the turmoil by dumping bonds and buying stocks. “I don’t expect that we will act differently in any similar crisis in the future,” he said. During a recent conference on globalization, the fund’s chief strategist, Bjorn Erik Orskaug, suggested the world might be at an “inflection point” in trade, with shallower value chains and less cross-border production. And then there’s the protectionist agenda some governments are pursuing. “Is there also a political situation that could make it more challenging?” Slyngstad said. “Time will tell, but there’s of course a risk on the horizon.” He says the wealth fund’s extremely long-term investment timeline allows it to look past the noise coming from governments that come and go.

The fund will probably stay over-weighted in Europe, where it’s more of an active investor. But the only two economies that really matter are the U.S. and China, Slyngstad said. [..] As the fund approaches $1 trillion in value, its stated goal is to safeguard today’s oil wealth for future generations of Norwegians. It has surged in size since its inception two decades ago, generating an annual nominal return of 5.89%. Norway’s government last year started taking cash out of the fund for the first time, to make up for lower oil revenue. Withdrawals are set to hit about 72 billion kroner ($9.3 billion) in 2017, and remain at that level in coming years amid stricter fiscal rules.

Minnesota’s debt to its workers’ retirement system has soared by $33.4 billion, or $6,000 for every resident, courtesy of accounting rules. The jump caused the finances of Minnesota’s pensions to erode more than any other state’s last year as accounting standards seek to prevent governments from using overly optimistic assumptions to minimize what they owe public employees decades from now. Because of changes in actuarial math, Minnesota in 2016 reported having just 53% of what it needed to cover promised benefits, down from 80% a year earlier, transforming it from one of the best funded state systems to the seventh worst, according to data compiled by Bloomberg. “It’s a crisis,” said Susan Lenczewski, executive director of the state’s Legislative Commission on Pensions and Retirement.

The latest reckoning won’t force Minnesota to pump more taxpayer money into its pensions, nor does it put retirees’ pension checks in any jeopardy. But it underscores the long-term financial pressure facing governments such as Minnesota, New Jersey and Illinois that have been left with massive shortfalls after years of failing to make adequate contributions to their retirement systems. The Governmental Accounting Standards Board’s rules, ushered in after the last recession, were intended to address concern that state and city pensions were understating the scale of their obligations by counting on steady investment gains even after they run out of cash – and no longer have money to invest. Pensions use the expected rate of return on their investments to calculate in today’s dollars, or discount, the value of pension checks that won’t be paid out for decades.

Six new banks have joined a UBS-led effort to create a digital cash system that would allow financial markets to make payments and settle transactions quickly via blockchain technology. The group aims to launch the system late next year. Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street have joined the group developing the “utility settlement coin” (USC), a digital cash equivalent of each of the major currencies backed by central banks, UBS said on Thursday. The group is in discussions with central banks and regulators and is aiming for a “limited ’go live’” in the latter part of 2018, UBS’s head of strategic investment and fintech innovation told the Financial Times.

The Swiss bank first launched the concept in September 2015 with London-based blockchain company Clearmatics, and was later joined on the project by BNY Mellon, Deutsche Bank, Santander and brokerage ICAP. The USC would be convertible at parity with a bank deposit in the corresponding currency, making it fully backed by cash assets at a central bank. Spending a USC would be the same as spending the real currency it is paired with. Blockchain works as a tamper-proof shared ledger that can automatically process and settle transactions using computer algorithms, with no need for third-party verification. Because it does not require manual processing, nor authentication through intermediaries, the technology can make payments faster, more reliable and easier to audit.

Russian President Vladimir Putin warned Friday of a “major conflict” looming on the Korean Peninsula, calling for talks to alleviate the crisis after Pyongyang fired a missile over Japan this week. “The problems in the region will only be solved via direct dialogue between all concerned parties, without preconditions,” Putin said. “Threats, pressure and insulting and militant rhetoric are a dead end,” a statement from his office said, adding that heaping additional pressure on North Korea in a bid to curb its nuclear programme was “wrong and futile.” Tensions on the Korean Peninsula are at their highest point in years after a series of missile tests by Pyongyang.

Early on Tuesday, the reclusive state fired an intermediate-range Hwasong-12 over Japan, prompting US President Donald Trump to insist that “all options” were on the table in an implied threat of pre-emptive military action. The UN Security Council denounced North Korea’s latest missile test, unanimously demanding that Pyongyang halt the programme. US heavy bombers and stealth jet fighters took part in a joint live fire drill in South Korea on Thursday, intended as a show of force against the North, Seoul said. Putin said he feared the peninsula was “on the verge of a major conflict” and called for all sides to sign up to a mediation programme drawn up by Moscow and Beijing. He echoed comments by Foreign Minister Sergei Lavrov who in a Wednesday telephone call with US counterpart Rex Tillerson “underscored… the need to refrain from any military steps that could have unpredictable consequences.”

Prime candidate for worst report ever. The Independent tweeetd: “12 Nobel Prize winners just warned Trump is one of the gravest threats to humanity “. But that’s not what the article by the Press Association says. It says two.

Nobel Prize winners consider nuclear war and US President Donald Trump as among the gravest threats to humanity, a survey has found. More than a third (34%) said environmental issues including over-population and climate change posed the greatest risk to mankind, according to the poll by Times Higher Education and Lindau Nobel Laureate Meetings. But amid rising tensions between the US and North Korea, almost a quarter (23%) said nuclear war was the most serious threat. Of the 50 living Nobel Prize winners canvassed, 6% said the ignorance of political leaders was their greatest concern – with two naming Mr Trump as a particular problem. Peter Agre, who won the Nobel Prize for chemistry in 2003, described the US President as “extraordinarily uninformed and bad-natured”. He told Times Higher Education: “Trump could play a villain in a Batman movie – everything he does is wicked or selfish.”

Laureates for chemistry, physics, physiology, medicine and economics took part in the survey, with some highlighting more than one threat. Peace Prize and Literature Prize recipients were not canvassed. Infectious diseases and drug resistance were considered the gravest threats to humankind by 8% of respondents, while 8% cited selfishness and dishonesty and 6% cited terrorism and fundamentalism. Another 6% spoke of the dangers of “ignorance and the distortion of truth”. Despite high-profile figures Elon Musk and Professor Stephen Hawking expressing concern about the dangers associated with artificial intelligence, just two of those surveyed identified it as among the biggest threats facing humans.

John Gill, editor of Times Higher Education, said the survey offers “a unique insight into the issues that keep the world’s greatest scientific minds awake at night”. He said: “There is a consensus that heading off these dangers requires political will and action, the prioritisation of education on a global scale, and above all avoiding the risk of inaction through complacency.”

Greece wants nothing more than to avoid another bailout — which means it needs debt relief. And so far, that’s the sticking point. “There is now light at the end of the tunnel,” Greek Finance Minister Euclid Tsakalotos said hopefully in June. After months of wrangling, the European Union and International Monetary Fund had just agreed to release more rescue funds to the perennially troubled nation, bringing the total from its third bailout alone to €40.2 billion ($47.75 billion). Euro zone finance ministers took very light steps toward debt relief at that time — they said they were willing to keep deferring interest on financial assistance Greece had already received — but those measures fell short of the relief Greek Prime Minister Alexis Tsipras was pressing for.

The current bailout program is set to end in September of next year. Greece has been wracked by perennial financial crises since 2010, and it even appeared at risk of leaving the euro zone altogether in 2015. Tsipras’s objective is to re-gain full market access to international bond markets and to leave institutional help behind, so the subject of long-term debt is one that will continue to dominate discussions as it draws closer to September 2018. In July, Greece dipped into bond markets after a 3-year hiatus, issuing 5-year debt at an average yield of 4.66%. Greece is expected to return to the market again in the next 12 months. But Greece’s debt isn’t manageable in the long-run without being either extended or forgiven, according to the IMF, which is pressing for easier budgetary targets for Greece while simultaneously undertaking reforms.

Its European creditors currently require it to achieve a primary surplus before debt service of 3.5% of gross domestic product. The ECB has also been emphatic that it will not include Greek government bonds in its own debt-buying mechanism, the Public Sector Purchase Program. In a June letter, ECB President Mario Draghi ruled out that possibility, saying the central bank’s staff wasn’t in a position to fully analyze Greece’s public debt. Analysts at Barclays have estimated that the inclusion of Greek debt into ECB’s bond-buying program would entail monthly purchases of around 115 million euros ($136.5 million).

Hurricane Irma continues to strengthen much faster than pretty much any computer model predicted as of yesterday or even this morning. Per the National Hurricane Center’s (NHC) latest update, Irma is currently a Cat-3 storm with sustained winds of 115 mph but is expected to strengthen to a devastating Cat-5 with winds that could top out at 180 mph or more. Longer term computer models still vary widely but suggest that Irma will make landfall in the U.S. either in the Gulf of Mexico or Florida. Meteorological Scientist Michael Ventrice of the Weather Channel is forecasting windspeeds of up to 180 mph, which he described as the “highest windspeed forecasts I’ve ever seen in my 10 yrs of Atlantic hurricane forecasting.”

In a separate tweet, Ventrice had the following troubling comment: “Wow, a number of ECMWF EPS members show a maximum-sustained windspeed of 180+mph for #Irma, rivaling Hurricane #Allen (1980) for record wind”. The Weather Channel meteorologist also calculated the odds for a landfall along the eastern seaboard at 30%. Meanwhile, the Weather Channel has the “most likely” path of Irma passing directly over Antigua, Puerto Rico and Domincan Republic toward the middle of next week.

Frustrated Democrats hoping to elevate their election fortunes have a resounding message for party leaders: Stop talking so much about Russia. Democratic leaders have been beating the drum this year over the ongoing probes into the Trump administration’s potential ties to Moscow, taking every opportunity to highlight the saga and forcing floor votes designed to uncover any business dealings the president might have with Russian figures. But rank-and-file Democrats say the Russia-Trump narrative is simply a non-issue with district voters, who are much more worried about bread-and-butter economic concerns like jobs, wages and the cost of education and healthcare.

In the wake of a string of special-election defeats, an increasing number of Democrats are calling for an adjustment in party messaging, one that swings the focus from Russia to the economy. The outcome of the 2018 elections, they say, hinges on how well the Democrats manage that shift. “We can’t just talk about Russia because people back in Ohio aren’t really talking that much about Russia, about Putin, about Michael Flynn,” Rep. Tim Ryan (D-Ohio) told MSNBC Thursday. “They’re trying to figure out how they’re going to make the mortgage payment, how they’re going to pay for their kids to go to college, what their energy bill looks like. “And if we don’t talk more about their interest than we do about how we’re so angry with Donald Trump and everything that’s going on,” he added, “then we’re never going to be able to win elections.”

Ryan is among the small group of Democrats who are sounding calls for a changing of the guard atop the party’s leadership hierarchy following Tuesday’s special election defeat in Georgia — the Democrats’ fourth loss since Trump took office. But Ryan is hardly alone in urging party leaders to hone their 2018 message. Rep. Tim Walz (D-Minn.) has been paying particularly close attention to voters’ concerns because he’s running for governor in 2018. The Russia-Trump investigation, he said, isn’t on their radar. “I did a 22-county tour. … Nobody’s focusing on that,” Walz said. “That’s not to say that they don’t think Russia and those things are important, [but] it’s certainly not top on their minds.”

More than a million households living in private rented accommodation are at risk of becoming homeless by 2020 because of rising rents, benefit freezes and a lack of social housing, according to a devastating new report into the UK’s escalating housing crisis. The study by the homelessness charity Shelter shows that rising numbers of families on low incomes are not only unable to afford to buy their own home but are also struggling to pay even the lowest available rents in the private sector, leading to ever higher levels of eviction and homelessness. The findings will place greater pressure on the government over housing policy following the Grenfell Tower fire disaster in west London, which exposed the neglect and disregard for people living in council-owned properties in one of the wealthiest areas of the capital.

The Shelter report highlights how a crisis of affordability and provision is gripping millions with no option but to look for homes in the private rented sector due to a shortage of social housing. Shelter says that in 83% of areas of England, people in the private rented sector now face a substantial monthly shortfall between the housing benefit they receive and the cheapest rents, and that this will rise as austerity bites and the lack of properties tilts the balance more in favour of landlords. Across the UK the charity has calculated that, if the housing benefit freeze remains in place as planned until 2020, more than a million households, including 375,000 with at least one person in work, could be forced out of their homes. It estimates that 211,000 households in which no one works because of disability could be forced to go.

Graeme Brown, the interim chief executive at Shelter, said: “The current freeze on housing benefit is pushing hundreds of thousands of private renters dangerously close to breaking point at a time when homelessness is rising.” A total of 14,420 households were accepted by local authorities as homeless between October and December 2016, up by more than half since 2009 – with 78% of the increase since 2011 being the result of people losing their previous private tenancy. Local authorities are under a legal obligation to find emergency accommodation, such as in bed and breakfasts.

As in any other religion, faith lies behind capitalism. Faith that capital is a panacea always and in any situation: to push economic growth or to help less developed countries to catch up. Yet the fact is that the EU countries that were the main receivers of cohesion funds, before the extension to the East, later became rescued countries – and we have never before had as much capital on tap along with current low growth.

Both these facts should be enough to break the faith in capital or, at least, to recognise its limits. Let’s see those limits in the above-mentioned causes. The virtue of capital transfers to help low developed countries is based in old Marshall Plan history, which attributes the successful German recovery after WW2 to USA loans. Sure, those loans helped, but the necessary knowledge was already there and the capital transfers allowed the Germans to rebuild their supply capacity. Conversely, in the EU rescued countries, entering the EU came with a local supply capacity destruction, in Schumpeterian terms, for which cohesion funds were unable to compensate. As a result, their domestic demand outstripped internal supply and trade deficits became recurrent until the financial crash.

The key element was not capital but knowledge and its absence or availability in both situations; something very obvious but all too often forgotten. If capital has any virtue it comes from its origin: the capacity to produce output sufficient to recover the inputs used, to satisfy consumption needs and to save a part to be invested as new inputs for raising future output. It means that the virtue is not in the savings/capital itself but in the capacity to generate it. That’s why capital transfers that simply increased the receivers’ inputs provision, without increasing the output/input ratio –or system efficiency–, were in the end wasted money. To avoid this, it would have been necessary to increase the receivers’ efficiency, which is much more correlated with parameters like educational levels than with capitalization! Again, knowledge is the key question.

Furthermore, capital on its own is not only unable to help less developed countries catch up on their wealthier peers but it’s also unable to propel economic growth on its own, as we are now seeing. After years of letting profits grow at the cost of wages, hoping that greater capital would bring greater growth, now we hear companies claiming that they do not invest because they do not have sufficient demand to justify the investment. The clear solution would be to increase wages, but no single company will do it out of fear that the others won’t follow suit. In fact, what any company hopes is that the others increase wages and salaries but not itself. That’s why a global agent is needed: trade unions and the public administration! The latter to increase its spending to guarantee full employment and the former profiting from full employment to bargain higher salaries.

Bloomberg New Energy Finance’s latest New Energy Outlook points the way to a sunny, windy future for the global electric power industry. That doesn’t mean that fossil fuels (or nuclear power) will vanish. It also doesn’t mean that all fossil fuels are the same. The future of natural gas and coal is a tale of two resources — one a story of rising fortunes, the other of slow decline. The latest outlook on natural gas is brighter than ever: BNEF’s forecast for gas shows a higher estimate for consumption in 2040 than in previous years, with a short decline at the end of this decade.

Coal is a different matter. Coal demand is expected to peak late next decade, then decline almost every year to reach a low of 3.1 billion metric tons in 2040, about 25% lower than at its peak.

This long-term outlook is nuanced, as it should be. The aggregated demand for each fuel from 2020 to 2040 has not changed much in three successive New Energy Outlook reports. Total gas consumption has only increased 6% since the 2015 report, while coal consumption from 2020 to 2040 – despite the plunge that is now expected, as noted above – has only changed 3.5%, and was exactly the same in 2016. However, the shape of that coal curve is still important, even if the volume hasn’t changed much. A coal mine that opens today could have a 60-year life, but it is likely to be one fraught with oversupply and competition from other coal producers, as well as other technologies. So how does the 2017 New Energy Outlook for gas and coal compare to how major oil companies and the International Energy Agency see it? For gas, everyone agrees: Consumption grows. Shell expects gas consumption to more than double and, perhaps not surprisingly, Exxon Mobil and BP also expect consumption to increase at least 50%. BNEF’s expectations are a bit more muted.

Reclaiming Public Services is vital reading for anyone interested in the future of local, democratic services like energy, water and health care. This is an in-depth world tour of new initiatives in public ownership and the variety of approaches to deprivatisation. From New Delhi to Barcelona, from Argentina to Germany, thousands of politicians, public officials, workers, unions and social movements are reclaiming or creating public services to address people’s basic needs and respond to environmental challenges. They do this most often at the local level. Our research shows that there have been at least 835 examples of (re)municipalisation of public services worldwide since 2000, involving more than 1,600 municipalities in 45 countries.

Why are people around the world reclaiming essential services from private operators and bringing their delivery back into the public sphere? There are many motivations behind (re)municipalisation initiatives: a goal to end private sector abuse or labour violations; a desire to regain control over the local economy and resources; a wish to provide people with affordable services; or an intention to implement ambitious climate strategies. Remunicipalisation is taking place in small towns and in capital cities, following different models of public ownership and with various levels of involvement by citizens and workers. Out of this diversity a coherent picture is nevertheless emerging: it is possible to build efficient, democratic and affordable public services. Ever declining service quality and ever increasing prices are not inevitable. More and more people and cities are closing the chapter on privatisation, and putting essential services back into public hands.

Ulli Sima, Vienna City Councilor for the Environment and Wiener Stadtwerke: “As early as 2001, Vienna protected drinking water with a constitutional decision. Municipal services must remain public and should not be sacrificed to private profit. We want to ally with other cities for strong municipal servicest.” Eloi Badia, the Barcelona Councilor for presidency, water and energy: “It is important to demystify the process of privatisation that has been launched in recent years by several governments, because it’s a model that has not proved its efficiency, failing to offer a better service or a better price.”

Célia Blauel, President of Eau de Paris and Deputy Mayor of Paris in charge of the environment, sustainable development, water and the energy-climate plan: “Bringing local public services under public control is a major democratic issue, especially for such essential services as energy or water. It means greater transparency and better citizen supervision. In the context of climate change, it can contribute to leading our cities toward energy efficiency, the development of renewables, the conservation of our natural resources, and the right to water. ”

When things get serious in the EU, laws get bent and loopholes get exploited. That is what is happening right now in Italy, where the banking crisis has reached tipping point. The ECB, together with the Italian government, have just this weekend to resolve Banca Popolare di Vicenza and Veneto Banca, two zombie banks that the ECB, on Friday night, ordered to be liquidated. Unlike Monte dei Pachi di Siena, they will not be bailed out primarily with public funds. Senior bondholders and depositors will be protected while shareholders and subordinate bondholders will lose their shirts. However, as the German daily Welt points out, subordinate bondholders at Monte dei Pachi di Siena had billions of euros at stake, much of it owned by its own retail customers who’d been sold these bonds instead of savings products such as CDs. So for political reasons, they were bailed out.

Junior bonds play a smaller role at the two Veneto-based banks. According to the Welt, the two banks combined have €1.33 billion (at face value) in junior bonds outstanding. They last traded between 1 cent and 3 cents on the euro. So worthless. Only about €100 million were sold to their own customers, not enough to cause a political ruckus in Italy. So they will be crushed. The good assets and the liabilities, such as the deposits, will be transferred to a competing bank. According to a rescue plan apparently drawn up by investment bank Rothschild that surfaced a few days ago, Intesa Sao Paolo, Italy’s second largest bank, would get these good assets and the deposits (liabilities), for the token sum of €1, while all the toxic assets (non-performing loans) would be shuffled off to a state-owned “bad bank” – and thus, the taxpayer.

According to the Italian daily Il Sole 24 Ore, the bad bank would be left holding over €20 billion of festering assets. “Intesa gets a free gift, the state takes on all the bad stuff and the taxpayer pays,” said at the time Renato Brunetta, parliamentary leader for former prime minister Silvio Berlusconi’s Forza Italia party. It is testament to just how desperate the situation has become in Italy’s banking crisis. The country’s largest lender, Unicredit, is in no position to help out: it had to raise €13 billion of new capital earlier this year just to keep itself afloat. Whether the deal with Intesa is still possible after the ECB’s decision to liquidate the banks, and what form this deal, if any, will take, and how much the taxpayer will have to fork over, and how to sugarcoat this in the most palatable terms is what the Italian government is currently trying to hammer out in its emergency meeting.

Health spending in Greece plunged 40% in the 2009-2015 period, Deloitte said in a survey released on Thursday. According to the survey, health spending fell to €14.1 billion in 2014, hit by a significant shrinking in medical/pharmaceutical coverage by the state and the social insurance system. It also stressed that this sharp decline mostly hit pharmacies and other professionals in the health sector and less the country’s hospitals. Hospital spending fell to €6.2 billion in 2015, from €9.0 billion in 2009, for an average annual decline of 6.0%, while average annual decline in the retail sector reached 7.0% and 9.0%, respectively. Deloitte said the state social insurance system covers 59.1% of total health spending in Greece, with patients covering 35.5% -a %age significantly higher compared with other European countries (UK 9.5%, France 6.7%, Italy 21.7%).

3.7% of total health spending is covered by private insurance contracts. Private hospitals were also hit during the 2009-2015 period, leading to more consolidation as the number of private hospitals fell by 6.0% and their size grew by around 1.0%. The total number of private and state hospitals in Greece was 283, mostly in Attica, offering 45,900 beds. The survey said that the number of beds surpassed demand by at least 18%. The survey noted that health spending recovered slightly to €14.7 billion in 2015 and stressed that international investors were showing strong interest for business deals in Greece.

Credit ratings agency Moody’s late Friday raised Greece’s long-term issuer rating to “Caa2” from “Caa3” after eurozone governments extended a credit lifeline to the country. Moody’s also changed its outlook to “positive”, up from “stable” previously, saying it saw signs that the heavily indebted country’s economy was stabilising. It pointed to a mid-June agreement reached by Greece’s creditors to relaunch an aid plan to the country, which had been blocked for months due to disagreements between eurozone countries – especially Germany – and the IMF. The move reduces the spectre of a short-term crisis, after eurozone governments agreed to give Greece a new credit lifeline of some €8.5 billion ($9.5 billion). Moody’s said it expected Greece’s debt ratio to stabilise this year at 179% of GDP, adding that growth should return to the economy this year and next.

Greece returned to growth in the first quarter of 2017, with a 0.4% increase in GDP, according to figures revised upwards in early June. “It is too early to conclude that economic growth will be durable,” Moody’s said. The IMF, which links financial aid to debt relief, has also signed an “agreement in principle” to allow immediate assistance that avoids a payment crisis in Athens this summer. It said Thursday that negotiations with creditors for debt reduction had “made progress”. “If we did not think there was a good chance of reaching a debt deal, we would not have chosen that route,” an IMF spokesman said. Moody’s also raised the long-term country ceilings for foreign-currency and local-currency bonds to B3 from Caa2.

The IMF, which day after day is busy “saving” economically suffering countries such as Greece, also happens to agree with this brave new worldview. In a working paper titled “The Macroeconomics of De-Cashing,” which the IMF claims does not necessarily represent its official views, the fund nevertheless provides a blueprint with which governments around the world could begin to phase out cash. This process would commence with “initial and largely uncontested steps” (such as the phasing out of large-denomination bills or the placement of upper limits on cash transactions). This process would then be furthered largely by the private sector, providing cashless payment options for people’s “convenience,” rather than risk popular objections to policy-led decashing.

The IMF, which certainly has a sterling track record of sticking up for the poor and vulnerable in society, comforts us by saying that these policies should be implemented in ways that would augment “economic and social benefits.” These suggestions, which of course the IMF does not necessarily officially agree with, have already begun to be implemented to a significant extent in the IMF debt colony known officially as Greece, where the IMF has been implementing “socially fair and just” austerity policies since 2010, which have resulted, during this period, in a GDP decline of over 25%, unemployment levels exceeding 28%, repeated cuts to what are now poverty-level salaries and pensions, and a “brain drain” of over 500,000 people—largely young and university-educated—migrating out of Greece.

Indeed, it could be said that Greece is being used as a guinea pig not just for a grand neoliberal experiment in both austerity, but de-cashing as well. The examples are many, and they have found fertile ground in a country whose populace remains shell-shocked by eight years of economic depression. A new law that came into effect on January 1 incentivizes going cashless by setting a minimum threshold of spending at least 10% of one’s income via credit, debit, or prepaid card in order to attain a somewhat higher tax-free threshold. Beginning July 27, dozens of categories of businesses in Greece will be required to install aptly-acronymized “POS” (point-of-sale) card readers and to accept payments by card.

usinesses are also required to post a notice, typically by the entrance or point of sale, stating whether card payments are accepted or not. Another new piece of legislation, in effect as of June 1, requires salaries to be paid via direct electronic transfers to bank accounts. Furthermore, cash transactions of over €500 have been outlawed. In Greece, where in the eyes of the state citizens are guilty even if proven innocent, capital controls have been implemented preventing ATM cash withdrawals of over €840 every two weeks. These capital controls, in varying forms, have been in place for two years with no end in sight, choking small businesses that are already suffering.

You may remember hearing back in September that Bayer, the largest pharmaceutical company in the world, made a deal to buy out Monsanto for $66 billion. Although Monsanto was voted the most evil company in the world in 2013 and its reputation has continued to fall since, Bayer still went ahead with the buyout. A merger between these two companies is unsurprising, as though they both have long histories of involvement with Nazism and chemical weapons like agent orange which have devastated Vietnam since the war. In fact, Bayer began as a break-off company of the infamous IG Farben, which produced the chemical weapons used on the Jews during the Nazi reign. After the war, Farben was forced to break up into several companies, including BASF, Hoeschst, and Bayer.

Soon after at the Nuremberg trials, 24 Farben executives were sent to prison for crimes against humanity. However, in a matter of just 7 years each of them was released and began filling high positions in each of the former Farben companies, and many of them began working for the Russian, British, and American governments through a joint intelligence venture called “Operation Paperclip”: (“IG (Interessengemeinschaft) stands for “Association of Common Interests”: The IG Farben cartel included BASF, Bayer, Hoechst, and other German chemical and pharmaceutical companies. As documents show, IG Farben was intimately involved with the human experimental atrocities committed by Mengele at Auschwitz. A German watchdog organization, the GBG Network, maintains copious documents and tracks Bayer Pharmaceutical activities.” – Alliance for Human Research Protection)

After all these years, Bayer is now richer and more powerful than their predecessor company I.G. Farben ever was. According to Big Buds Magazine, Monsanto and Scotts Miracle-Gro have a “deep business partnership” and plan on taking over the cannabis industry. Hawthorne, a front group for Scotts, has already purchased three of the major cannabis growing companies: General Hydroponics, Botanicare, and Gavita. Many other hydroponics companies have also reported attempted buyouts by Hawthorne. (“They want to bypass hydroponics retail stores…When we said we won’t get in bed with them they said, ‘Well, we could just buy your whole company like we did with Gavita and do whatever we want.’” – Hydroponics Lighting Representative) Jim Hagedorn, CEO of Scotts Miracle-Gro, has even said that he plans to “invest, like, half a billion in [taking over] the pot business… It is the biggest thing I’ve ever seen in lawn and garden.”

He has also invested in companies such as Leaf, which grows cannabis in an electronically regulated indoor terrarium accessible via smartphone. It is logical that Bayer, being the parent company, would work together with Monsanto in order to share secrets which would advance mutual business. Many people in the cannabis industry have been warning about this, including Michael Straumietis, founder and owner of Advanced Nutrients. (“Monsanto and Bayer share information about genetically modifying crops,” Straumietis notes. “Bayer partners with GW Pharmaceuticals, which grows its own proprietary marijuana genetics. It’s logical to conclude that Monsanto and Bayer want to create GMO marijuana.” – Michael Straumietis)

A flurry of Fed speakers, including the Fed chair, will keep markets busy Wednesday. There are also mortgage applications at 7 a.m. EDT, durable goods data at 8:30 a.m. EDT and oil inventory data at 10:30 a.m. EDT. OPEC, meanwhile, is meeting in Algeria and could continue to create volatility in oil prices after headlines from there triggered a near 3% plunge Tuesday. Fed Chair Janet Yellen appears before the House Financial Services Committee at 10 a.m. on supervision and regulation. The Fed chair was personally criticized in the presidential debate Monday night by GOP candidate Donald Trump, who said the Fed’s decision to keep rates low was political and that it’s creating a bubble in the stock market.

“It has to worry the markets that potentially you could have a president getting into a nasty dispute with the chairman of the Fed in early 2017. That’s something the market would not like to see. I think the Fed has not done a very good job communicating. It’s a cacophony of confusing comments. There’s reason to criticize the Fed, but the personal attack on Yellen is unprecedented,” said Greg Valliere, chief global strategist at Horizon Investments. Traders are watching to see if Yellen is in the political hot seat on banking regulation and supervision when she appears before the committee.

The chart below shows the%age change of real wages (left, y-axis) as these men aged (horizontal, x-axis). As young adults, their wages soared by up to 10% a year. Then the rate of growth fell off sharply. When the men in this cohort turned 40 in the 1990s, wage growth disappeared. By around the year 2000, the real wage peak in the US, when the oldest men in this cohort turned 50, wages had begun to decline for most of them. By the time these men were in the mid-50s, their wages across the board were heading south – and for many of them, rapidly. Hence this colorful, drooping spaghetti:

This “negative real wage growth” – devastating as it may be for those experiencing it – is nothing special, according to the New York Fed. And it crushes not just white men, but everyone: “Real wages tend to rise early in a worker’s career, flatten out mid-career, and then decline as the worker approaches retirement. This inverted U-shape pattern is a well-established feature in the labor economics literature.” The report explained it further: “Labor economists explain the rapid real wage growth early in a worker’s career as a combination of on-the-job learning and better matching of workers to jobs. A large portion is due to job matching as workers change jobs in search of a position that better utilizes their skills. As workers age, the decline in the pace of their real wage growth reflects a diminished incentive to invest in new skills (because their remaining work life is shorter) and fewer job changes (because they have found a good job match).”

The report divides life for its purposes into three phases, terms of wage growth: • Fast growth, up to age 40, • Flat growth, ages 41-54, • “Negative growth,” age 55 and older. Now there’s another problem mucking up the overall and ever-elusive real-wage growth miracle everyone has been counting on: demographics. The US population is aging. There are more people aged 40 and over in the workforce, and their incomes are now flat or declining. The portion of the population in the first phase when wages are growing fast has plunged from close to 60% in the 1980s to the mid-40% range currently. And the portion of workers with wages in the “negative growth” phase has ballooned. Given the demographics, real wage declines among workers over 50 will continue to hammer the national averages.

Call it the Great Grocery-Store Giveaway of 2016. In Austin, Texas, Randalls slashed prices for boneless beef ribs by 40%, to $3.99 a pound. Not to be outdone, the H-E-B grocer down the street charged $1 a pound less. Not long ago, Albertsons advertised a deal you don’t normally see on your finer cuts of meat: “buy 1 get 1 free” specials on “USDA Choice Petite Sirloin Steak.” And what does $1 buy these days? In North Bergen, New Jersey, you could pick up a dozen eggs at Wal-Mart. OK, the price was actually $1.14. A mile away, check out Aldi, the German supermarket discounter, which can actually break the buck – 12 eggs for 99 cents. A year ago, you would have paid, on average, three times that price.

In a startling development, almost unheard of outside a recession, food prices have fallen for nine straight months in the U.S. It’s the longest streak of food deflation since 1960 – with the exception of 2009, when the financial crisis was winding down. Analysts credit low oil and grain prices, as well as cutthroat competition from discounters. Consumers are winning out; grocery chains, not so much. Their margins and, in some cases, their stock prices, are taking a hit. Eggs and beef have have grown especially inexpensive, and it isn’t only an American phenomenon: In England, Aldi recently offered its prized 8-ounce wagyu steaks from New Zealand for about $6.50 – a little more than the price of a pint of beer. “The severity of what we’re seeing is completely unprecedented,” said Scott Mushkin at Wolfe Research, who has studied grocery prices around the country for more than ten years. “We’ve never seen deflation this sharp.”

Here are the 29 banks in the ESTX Banks Index of Eurozone banks (so Swiss and UK banks, for example are not included). It shows the percentage drop from their 52-week high. But for some of these banks, particularly for Italian and Portuguese banks, that 52-week high was just about last year’s 52-week low, so relentless has their decline been over the years. Some of them had already been reduced to penny stocks years ago, and for them, in euro terms, the biggest losses occurred back then. So these mayhem banks, color coded by country:

If a bank stock plunges from €0.04 to €0.01 over the 52-week period, such as Banco Comercial Português in Portugal, it has been toast for longer than 52 weeks, and the percentage plunge is essentially meaningless because shares were worthless to begin with. The shares of five of these banks trade under €1. Another 8 banks trade under €3. These 29 banks form a big part of the European financial system. It includes some of the world’s largest banks, such as Deutsche Bank, Societe Generale, and BNP Paribas. It includes a slew of other “systemically important financial institutions,” such as Unicredit, ING, and Santander. They’re troubled at the same time. The can has been kicked down the road for years. Now negative interest rates appear to have inadvertently crushed the can.

The turmoil swirling around Deutsche Bank has brought simmering concerns about the health of Europe’s banks back to a boil. Germany’s largest lender extended losses to a record low this week, dragging down European financial stocks, after the U.S. Department of Justice requested $14 billion to settle claims tied to fraudulent mortgage-backed securities. While the bank said it won’t pay anywhere close to that amount, the dust-up fueled doubts over its capital levels and refocused investors on the industry’s faults. “One word – Deutsche,” David Moss at BMO Global Asset Management in London, said when asked to sum up the recent slump in European banks. “That’s the biggest thing – it’s reignited the risk around regulation, fines and litigation.”

Dismissing concern about the bank’s finances, Chief Executive Officer John Cryan told Bild in an interview published late Tuesday that capital “is currently not an issue,” and accepting government support is “out of the question for us.” Deutsche Bank has tumbled almost 20% this month, while Royal Bank of Scotland – which also faces a looming Justice Department fine – fell 13%, and Italy’s UniCredit slumped 12%. The Bloomberg Europe 500 Banks and Financial Services Index has declined 4.2% in September, making it the worst month since June, when Britain’s vote to exit the European Union roiled markets and sent bank shares plunging.

[..] European banks are grappling with tougher regulatory requirements, sputtering economic growth and negative interest rates, which squeeze lending margins and crimp investment returns. In Italy, where banks are burdened with some €360 billion of soured loans, UniCredit is working on a plan to boost capital that may include asset sales and a stock offering, according to people familiar with the matter. In Germany, Commerzbank scaled back its full-year profit goals and may announce thousands of job cuts this week,

The IMF warned Tuesday that central banks are struggling to beat back deflationary forces and that governments need to spend to help them succeed. In a new assessment of global economic conditions, the IMF said many countries worldwide are battling disinflation – low and slowing inflation – due to weak global economic growth.If central banks around the world cannot halt this stall, and if companies and people increasingly believe they can’t halt it, their economies risk sinking into a deflationary spiral – where prices generally start to fall and companies and consumers hold back spending and investment, stalling the economy. In this case, “countries can’t afford to be complacent,” the Fund warned. The report said deflationary pressures in many countries are coming from abroad, in the form of sinking prices of both commodities and manufactured goods.

“The breadth of the decline in inflation across countries and the fact that it is stronger in the tradable goods sectors underscore the global nature of disinflationary forces,” the IMF said. Weak inflation challenges central banks’ ability to use monetary policy to stimulate demand, the IMF notes, because interest rates are likely to already be very low, giving them little room to cut further. That has been the case with top central banks including the Fed, the ECB and the BOJ, with the latter two already having taken some interest rates negative. “Eventually, ‘persistent’ disinflation can lead to costly deflationary cycles – as we have seen in Japan – where weak demand and deflation reinforce each other, and end up increasing debt burdens and hindering economic activity and job creation.”

Defending the Fed’s recent decision to put off raising interest rates again, Fed Chair Janet Yellen told reporters last week that she and other Fed governors wanted “to see some continued progress” before taking that step. Politics, she insisted, had nothing to do with it. What Ms. Yellen didn’t say is that the Fed couldn’t raise its rates without breaking the law. Since when are Fed rate increases illegal? Since the 2007-08 subprime meltdown and financial disaster, actually. Until then the Fed could set any target it liked for the federal-funds rate—the interest rate banks pay for overnight loans of cash reserves. To keep the fed-funds rate from rising above target, the Fed pumped more reserves into the banking system. To keep it from dropping below, it took reserves away.

But after Lehman Brothers failed in 2008, the Fed’s efforts to keep the fed-funds rate from dropping below its target proved futile. To set a floor on how far the rate could go, the Fed started paying interest on banks’ reserve balances with the Fed, taking advantage of the 2006 Financial Services Regulatory Relief Act giving it permission to do so. Alas, it didn’t work. Government-sponsored enterprises Fannie Mae, Freddie Mac and the Federal Home Loan Banks, which also kept deposit balances at the Fed but weren’t eligible for interest on reserves (IOR), started making overnight loans to banks at rates below the IOR rate. In effect, this turned what the Fed hoped would be a floor on the fed-funds rate into a ceiling. To raise rates now, the Fed increases the rate on reserves.

So what’s to keep the Fed from raising rates this way again? The 2006 Financial Services Regulatory Relief Act is what. For that law only allows the central bank to pay interest on reserves “at a rate or rates not to exceed the general level of short-term interest rates.” The rub is that the Fed’s IOR rate of 50 basis points (0.5%) already exceeds the closest comparable market rates: those on shorter-term Treasury bills. At the start of this month, the four-week T-bill rate was just 26 basis points; since then it has slid even lower, all the way down to 10 basis points. Judging by these numbers, the Fed is already flouting the law. Another hike would mean flouting it all the more flagrantly. Lawmakers will be duty-bound to object. The law can only be stretched so far. Unless “general short-term rates” rise markedly, Congress can be expected to question the legality of any Fed rate increase. If it comes to that, Ms. Yellen will find it very hard to dissemble her way out of it.

Global container volumes are on track for zero growth this year, which would mark the sector’s worst performance since the 2009 economic crisis and a sure catalyst for further bankruptcies and possible acquisitions in the beleaguered shipping industry, shipping executives said. Freight rates, the predominant source of income for shipping companies, fell 20% in the benchmark Asia to Europe trade route this week compared with last week to $767 per container. Rates have mostly stayed well below $1,000 since the start of the year and operators say anything below $1,400 is unsustainable. They aren’t expected to turn around soon.

China’s Golden Week holiday starts at the beginning of October, marking the slow season for operators as many Chinese factories cut production levels after an output frenzy in the summer months when western importers stack up products for the year-end holidays. “The industry faces its worst year since the Lehman Brothers collapse,” said Jonathan Roach, an analyst at London based Braemar ACM. “Demand is around zero and any moves to increase freight rates will likely fail.” Hanjin, South Korea’s biggest operator and the world’s seventh largest in terms of capacity, filed for bankruptcy protection last month and is under court order to sell its own ships and returning chartered ships to their owners. Container operators, which move everything from clothes and shoes to electronics and furniture, are burdened by 30% more capacity in the water than demand.

Wells Fargo executives will forfeit millions of dollars in the wake of revelations that the bank’s sales quotas led to the creation of more than 2m unauthorized accounts. The bank’s chief executive John Stumpf will forgo his salary for the coming months as independent directors launch a new investigation into Wells Fargo’s retail banking and sales practices. Last year, Stumpf made about $19.3m. Stumpf will also forfeit unvested equity awards worth about $41m. Carrie Tolstedt, who oversaw the retail banking at Wells Fargo while the unauthorized accounts were opened, was slated to receive as much as $124.6m after retiring this summer, according to Fortune. The bank said on Tuesday that she would not receive an undisclosed severance and would forfeit about $19m in unvested awards.

Less than three weeks ago, Wells Fargo announced that it had agreed to pay $185m in penalties after an audit found that its employees opened as many as 1.5m deposit accounts and 565,000 credit card accounts without customers’ consent. The accounts were opened by the bank’s staff in hopes of meeting their monthly sales quota and earning their incentive bonuses. Wells Fargo workers have tried to draw attention to the “unreasonable” quotas before – some even staged a protest in front of the bank’s headquarters last year. When Stumpf testified in front of the US Senate last week, he drew ire from US lawmakers. Many of them called for the bank to recoup pay from Stumpf and Tolstedt and hold them accountable.

Greece’s economic recovery is proving elusive, challenging the forecasts of the country’s government and foreign creditors still counting on growth reviving this year. The IMF said last week that the economy is stagnating, in the first admission from creditors that Greece’s recovery is off track again. Growth will only restart next year, the head of the IMF’s team in Greece said on a conference call with reporters, without offering details. Of particular concern is that exports, which are supposed to lead Greece out of trouble, are on a slow downward trajectory, hampered by capital controls, taxes and a lack of credit. “There is no chance we will see a rebound unless we see some bold political decisions that would introduce a more stable business environment,” said Dimitris Tsakonitis, general manager at mining company Grecian Magnesite.

The bailout agreement between Greece and its German-led creditors assumes rapid growth from late 2016 onward, including an official forecast of 2.7% growth in 2017. Private-sector economists believe next year’s growth could be closer to 0.6%. Weaker growth would undermine the budget, likely leading to fresh arguments with lenders about extra austerity measures. Greece is still grappling with the measures it has already agreed to. Late on Tuesday the country’s parliament approved pension overhauls and other policy changes that have been delayed for months, holding up bailout funding.

Greek activists are warning that the privatisation of state water companies would be a backward step for the country. Under the terms of the bailout agreement approved by the Greek parliament today, Greece has pledged to support an existing programme of privatisation, which includes large chunks of the water utilities of Greece’s two largest cities – Athens and Thessaloniki. There is ongoing debate about water privatisation and the role of business. Across Europe a wave of austerity-driven privatisation proposals has led to protests in Ireland, Italy, Greece and Spain. At the same time, some of northern Europe’s largest cities, including Paris and Berlin, are buying back utilities they sold just last decade.

President of the Thessaloniki water company trade union George Argovtopoulos said a move to a for-profit model would raise prices for consumers and degrade services. “It’s not any more a democracy or equality in the EU. It’s a kind of business,” he said, adding that austerity measures that require water privatisation smacked of a “do as I say, but not as I do” approach from Germany. “We know that in Berlin, just two years ago they remunicipalised the water there, although they paid just under €600m to Veolia [to buy back its stake]. It’s clear that the model of privatisation of water has failed all around the world,” he said. The German finance ministry refused to comment ahead of a Eurogroup meeting in Brussels on Friday where the third bailout deal looked set to be signed.

[..] Austerity-led changes to water supply have been fiercely resisted across Europe’s most indebted countries. In Dublin this year, huge protests erupted over plans to directly charge water users who previously paid for water through their taxes. This was seen as a first step towards selling off Ireland’s water supply. A water privatisation push by former Italian prime minister Silvio Berlusconi was crushed by a 95% referendum vote in 2011. A similar referendum in Thessaloniki last year delivered a 98% vote against. A 2014 report by the Transnational Institute’s Satoko Kishimoto found that across the world 180 cities had bought back (or remunicipalised) their water supply. She said this was a response to almost universally higher water prices and the loss of control over a fundamental resource.

The latest food safety scandal in China might be its most damaging. Earlier this week, a former doctoral student at one of the country’s national testing centers for genetically modified organisms went public with allegations of scientific fraud, including claims that records were doctored extensively, that unqualified personnel were employed under illegal contracts and – most seriously – that authorities refused to take action when his concerns were aired privately. On Wednesday, China’s Ministry of Agriculture responded to a social media storm by suspending operations at the center. That might take care of the current scandal, but the Chinese public’s hostility toward GMOs won’t go away so easily.

Those concerns have only grown over the past decade as the government has increased its support of GMOs, including approval of the state-owned ChinaChem Group’s $43 billion takeover offer for the Swiss seed giant Syngenta. These efforts have galvanized a very public opposition that transcends China’s typical political fault lines, and created one of the government’s most intractable headaches. Feeding China’s huge population has never been easy. But over the last three decades, the challenges have become considerably greater as urbanization devoured farmland, and pollution made even more of it unusable. Today, the government is faced with the task of feeding 21% of the world’s population with 9% of its arable land. Its reliance on foreign goods has made China the world leader in imports since 2011.

Officials now fear the country could become dependent on foreigners for its food supply and the government remains committed to maintaining self-sufficiency in rice, wheat, and other key grains. As a result, the political pressure to increase yields is considerable. In fact, this pressure is centuries-old. Domesticated rice first appeared in the Yangtze River Valley at least 8,000 years ago, and Chinese farmers and scientists have been innovating ever since. In 1992, China became the first country to introduce a GMO crop into commercial production, when it sowed a virus-resistant tobacco plant on 100 acres. Since then, the government has issued safety certificates for a wide range of GMO crops, ranging from chili peppers to petunias. Yet, so far at least, only cotton has gone into wide cultivation. Other GMOs – especially rice, a staple of the Chinese diet – are still awaiting approval to be domestically cultivated.

Each cycle of a washing machine could release more than 700,000 microscopic plastic fibres into the environment, according to a study. A team at Plymouth University in the UK spent 12 months analysing what happened when a number of synthetic materials were washed at different temperatures in domestic washing machines, using different combinations of detergents, to quantify the microfibres shed. They found that acrylic was the worst offender, releasing nearly 730,000 tiny synthetic particles per wash, five times more than polyester-cotton blend fabric, and nearly 1.5 times as many as polyester. “Different types of fabrics can have very different levels of emissions,” said Richard Thompson, professor of marine biology at Plymouth University, who conducted the investigation with a PhD student, Imogen Napper.

“We need to understand why is it that some types of [fabric] are releasing substantially more fibres [ than others].” These microfibres track through domestic wastewater into sewage treatment plants where some of the tiny plastic fragments are captured as part of sewage sludge. The rest pass through into rivers and eventually, oceans. A paper published in 2011 found that microfibres made up 85% of human-made debris on shorelines around the world. The impact of microplastic pollution is not fully understood but studies have suggested that it has the potential to poison the food chain, build up in animals’ digestive tracts, reduce the ability of some organisms to absorb energy from foods in the normal way and even to change the behaviour of crabs.

Global stocks dropped, set for the biggest weekly loss since February, and the yen rose before key American jobs data that will help shape the U.S. interest-rate outlook. Australia’s currency slumped and its bonds surged after the nation’s central bank lowered its inflation forecast. The Stoxx Europe 600 Index and the MSCI Asia Pacific Index both lost ground, as did S&P 500 futures. Shanghai shares tumbled the most since February as raw-materials prices sank in China. The yen rose against all 16 major peers. The Bloomberg Dollar Spot Index gained for a fourth day, buoyed by comments from Federal Reserve officials that a June rate hike is possible. U.S. crude oil sank below $44 a barrel and industrial metals were poised for their biggest weekly loss since 2013. Australia’s three-year bond yield fell to a record.

A retreat in global equities gathered pace in the first week of May as data highlighted the fragile state of the world economy. The Reserve Bank of Australia joined the European Union in trimming inflation projections this week, after the Bank of Japan on April 28 pushed back the target date for meeting its 2% goal for consumer-price gains. Economists predict U.S. non-farm payrolls rose by 200,000 last month, a Bloomberg survey showed before Friday’s report. “With the U.S. jobs report coming up, investors are holding back,” said Masahiro Ichikawa at Sumitomo Mitsui in Tokyo. “They’re watching the yen very closely.” Four regional Fed presidents said Thursday they were open to considering an interest-rate increase in June, something that’s been almost ruled out by derivatives traders. Fed Funds futures put the odds of a hike next month at around 10%, down from 20% a month ago.

Chinese banks’ bad loans are at least nine times bigger than official numbers indicate, an “epidemic” that points to potential losses of more than $1 trillion, according to an assessment by brokerage CLSA Ltd. Nonperforming loans stood at 15% to 19% of outstanding credit last year, Francis Cheung, the firm’s head of China and Hong Kong strategy, said in Hong Kong on Friday. That compares with the official 1.67%. Potential losses could range from 6.9 trillion yuan ($1.1 trillion) to 9.1 trillion yuan, according to a report by the brokerage. The estimates are based on public data on listed companies’ debt-servicing abilities and make assumptions about potential recovery rates for bad loans. Cheung’s assessment adds to warnings from hedge-fund manager Kyle Bass, Autonomous Research analyst Charlene Chu and the IMF on China’s likely levels of troubled credit.

The IMF said last month that the nation may have $1.3 trillion of risky loans, with potential losses equivalent to 7% of GDP. CLSA estimates bad credit in shadow banking – a category including banks’ off-balance-sheet lending such as entrusted loans and trust loans – could amount to 4.6 trillion yuan and yield a loss of 2.8 trillion yuan. CLSA cites a diminishing economic return on stimulus pumped into the economy as among the reasons for a worsening outlook, with Cheung saying at a briefing that bad loans had the potential to rise to 20% to 25%. “China’s banking system has reached a point where it needs a comprehensive solution for the bad-debt problem, but there is no plan yet,” he said in the report.

Beijing can’t regulate shadow banking, since it let it grow far too big, but it can try to pick favorites. It’s relevant to ask who has the power in China these days. Local governments are neck deep in shadow loans, and Xi can’t afford, politically, to let them go bust. But can he afford to support them, financially?

In the pursuit of order in its financial markets, China’s banking regulator has tended to be one step behind in keeping up with a decade-long dalliance between commercial banks and the country’s non-bank lenders, called the shadow banking sector. Its latest directive suggests the government might finally be trying to get ahead. Bankers and analysts say the China Banking Regulatory Commission issued a notice to commercial lenders last week, taking aim at a shadow-banking product that has allowed banks to hide loans, including bad ones, from their books. The watchdog has tried cracking down on similar arrangements in the past. But this time, it appears to have taken a more nuanced approach in order to more effectively get at banks that originate the loans underlying these products.

In its crosshairs is a relatively obscure instrument called credit beneficiary rights, a product that is derived from shadow-banking deals and can then be sold between banks. The CBRC’s new directive in part takes aim at this practice by calling for banks to stop investing in credit beneficiary rights using funds raised from their own wealth management products. In China, shadow banks’ dexterity and relentlessness at product innovation have regularly pushed them right to the edge of what their regulators can tolerate. The CBRC directive, known as Notice No. 82, is the latest in a cat-and-mouse game that banks have played with regulators for years. Beneficiary rights are themselves an innovation to circumvent a CBRC clampdown in 2013 and 2014 on banks directly buying trust products in a similar arrangement to disguise loans, and then developing a lively interbank market for these rights transfers.

There have been regulatory interventions on variations of the practice every year since 2009. The commission hasn’t publicly released the directive. Analysts say the regulator is likely now huddled with banks to gauge how hard they will push back and how thoroughly the regulator can implement the requirements. Beneficiary rights confer on the buyer the right to a stream of income without ceding actual ownership of the underlying asset. That asset is often a corporate loan, which may or may not have already soured, though it could also be anything that generates an income stream, such as a trust, a wealth management product or a margin financing deal.

When one bank sells credit beneficiary rights to another, the transaction allows the first bank to use the accounting change to turn the underlying loan on its books into an “investment receivable.” The rules require banks to set aside about 25% of the receivable’s value in capital provisions, compared with 100% had it been a loan. The deals get more complex as layers are added to further disguise the loan. Banks will have third-party shadow financiers extend the actual loan to the company, in exchange for the bank’s purchase of beneficiary rights to the loan’s income stream.

China, maker of half the world’s steel, probably boosted production to a record in April as mills fired up furnaces and domestic prices surged to 19-month highs, according to Sanford C. Bernstein. Average daily output may have eclipsed the previous high of about 2.31 million metric tons in June 2014, said Paul Gait, a senior analyst in London. Producers ramped up supply as demand rebounded and prices jumped as much as 69% from their November low, generating the best margins since 2009.

The majority of American households feel poorer because they are poorer. Real (i.e. adjusted for inflation) median household income has declined for decades, and income gains are concentrated in the top 5%:

Even more devastating, wages’ share of GDP has been declining (with brief interruptions during asset bubbles) for 46 years. That means that as GDP has expanded, the gains have flowed to corporate and owners’ profits and to the state, which is delighted to collect higher taxes at every level of government, from property taxes to income taxes.

Here’s a look at GDP per capita (per person) and median household income. Typically, if GDP per capita is rising, some of that flows to household incomes. In the 1990s boom, both GDP per capita and household income rose together. Since then, GDP per capita has marched higher while household income has declined. Household income saw a slight rise in the housing bubble, but has since collapsed in the “recovery” since 2009.

These are non-trivial trends. What these charts show is the share of the GDP going to wages/salaries is in a long-term decline: gains in GDP are flowing not to wage-earners but to shareholders and owners, and through their higher taxes, to the government. The top 5% of wage earners has garnered virtually all the gains in income. The sums are non-trivial as well. America’s GDP in 2015 was about $18 trillion. Wages’ share -about 42.5%- is $7.65 trillion. If wage’s share was 50%, as it was in the early 1970s, its share would be $9 trillion. That’s $1.35 trillion more that would be flowing to wage earners. That works out to $13,500 per household for 100 million households.

Over the past century central banks have become the guardians of our economic and financial security. The Bundesbank and Federal Reserve, for example, are respected for achieving monetary stability, often in the face of political opposition. But central bankers can also lose the plot, usually by following the economic dogma of the day. When they do, their mistakes can be catastrophic. In the 1920s the German Reichsbank thought it a clever idea to have 2,000 printing presses running day and night to finance government spending. Hyperinflation was the result. Around the same time, the Federal Reserve stood by as more than a third of US bank deposits were destroyed, in the belief that banking crises were self-correcting. The Great Depression followed. Today the behaviour of the ECB suggests that it too has gone awry.

When reducing interest rates to historically low levels did not stimulate growth and inflation, the ECB embarked on a massive programme of purchasing eurozone sovereign debt. But the sellers did not spend or invest the proceeds. Instead, they placed the money on deposit. So the ECB went to the logical extreme: it imposed negative interest rates. Currently almost half of eurozone sovereign debt is trading with a negative yield. If this fails to stimulate growth and inflation, “helicopter money” will be next on the agenda. Future students of monetary policy will shake their heads in disbelief. What is more, as purchaser-of-last-resort of sovereign debt, the ECB is underwriting the solvency of its over-indebted members. Countries no longer fear that failure to reform their economies or reduce debt will raise the cost of borrowing.

Six years after the onset of the European debt crisis, total indebtedness in the eurozone keeps on rising. Badly needed reforms have been abandoned. As a result the eurozone is as fragile as ever. Safe keepers of our wealth, such as insurance companies, pension funds and savings banks barely earn a positive spread. Inflation is just above zero, well below the ECB’s defined target. And with growth anaemic, debt levels in some countries, such as Italy, are not sustainable. Worse still, the ECB is failing in its other mandated duty – to promote stability. Popular opposition to low and negative interest rates, when combined with continuing high unemployment, is fomenting anger with the European project. Even if current policy eventually results in an overdue recovery, political pressure is unlikely to abate.

The latest survey of the UK’s dominant services sector has today rounded off a dismal hat-trick of disappointment for the British economy. The Markit/CIPs PMI Index for April came in at 52.3. That’s above the 50 point that separates contraction from growth. But it’s also the weakest reading since February 2013, when the economy’s recovery was just starting. And it follows two pretty desperate readings this week from the equivalent PMIs for the manufacturing and construction sectors, which both showed the feeblest levels of activity in around three years. Put all these three readings together and one gets the “composite” PMI which can be used to roughly approximate to GDP growth in the overall economy. And combine these two metrics in the chart below (from Pantheon Macroeconomics) and you get this grim picture:

The blue line (left hand scale) shows the level of the composite PMI. The black line (right hand scale) shows the % quarterly rate of GDP growth. They track reasonably well over time. And the decline in the composite reading suggests GDP growth, which weakened to 0.4% in the first quarter of 2016, could be heading down to zero in the second quarter. What’s going on? Samuel Tombs of Pantheon says business and consumer jitters emanating from uncertainty about the outcome of the Brexit referendum has “brought the recovery to its knees”. More economists are now seriously talking of the possibile need for macroeconomic stimulus to get the recovery back on track. “The deterioration in April pushes the surveys into territory which has in the past seen the Bank of England start to worry about the need to revive growth either by cutting interest rates or through non-standard measures such as QE” said Chris Williamson of Markit.

One of my favorite memories of my brief life on Wall Street in the late 1980s is of Mervyn King’s visit. A year after Professor King – as I still think of him – had been my tutor at the London School of Economics, he was tapped to advise some new British financial regulator. As he had no direct experience of financial markets, either he or they thought he’d benefit from exposure to real, live American financiers. I’d been working at the London office of Salomon Brothers for maybe six months when one of my bosses came to me with a big eye roll and said, “We have this academic who wants to sit in with a salesman for a day: Can we stick him with you?” And in walked Professor King. I should say here that King’s students, including me, often came away from encounters with him feeling humored.

He was gentle with people less clever than himself (basically everyone) and found interest in what others had to say when there was no apparent reason to. He really wanted you to feel as if the two of you were engaged in a genuine exchange of ideas, even though the only ideas with any exchange value were his. Still, he had his limits. The man who a year before had handed me a gentleman’s B and probably assumed I would vanish into the bowels of the American economy never to be heard from again saw me smiling and dialing at my Salomon Brothers desk and did a double take. He took the seat next to me and the spare phone that allowed him to listen in on my sales calls. After an hour or so, he put down the phone. “So, Michael, how much are they paying you to do this?” he asked, or something like it.

When I told him, he said something like, “This really should be against the law.” Roughly 15 years later, King was named governor of the Bank of England. In his decade-long tenure, which ended in 2013, the Bank of England became, and remains, the most trustworthy institutional narrator of events in global finance. It’s the one place on the inside of global finance where employees don’t appear to be spending half their time wondering when Goldman Sachs is going to call with a job offer. For various reasons, they don’t play scared. One of those reasons, I’ll bet, is King.

As OPEC officials gathered this week to formulate a long-term strategy, few in the room expected the discussions would end without a clash. But even the most jaded delegates got more than they had bargained with. “OPEC is dead,” declared one frustrated official, according to two sources who were present or briefed about the Vienna meeting. This was far from the first time that OPEC’s demise has been proclaimed in its 56-year history, and the oil exporters’ group itself may yet enjoy a long life in the era of cheap crude. Saudi Arabia, OPEC’s most powerful member, still maintains that collective action by all producers is the best solution for an oil market that has dived since mid-2014.

But events at Monday’s meeting of OPEC governors suggest that if Saudi Arabia gets its way, then one of the group’s central strategies – of managing global oil prices by regulating supply – will indeed go to the grave. In a major shift in thinking, Riyadh now believes that targeting prices has become pointless as the weak global market reflects structural changes rather than any temporary trend, according to sources familiar with its views. OPEC is already split over how to respond to cheap oil. Last month tensions between Saudi Arabia and its arch-rival Iran ruined the first deal in 15 years to freeze crude output and help to lift global prices. These resurfaced at the long-term strategy meeting of the OPEC governors, officials who report to their countries’ oil ministers.

According to the sources, it was a delegate from a non-Gulf Arab country who pronounced OPEC dead in remarks directed at the Saudi representative as they argued over whether the group should keep targeting prices. Iran, represented by its governor Hossein Kazempour Ardebili, has been arguing that this is precisely what OPEC was created for and hence “effective production management” should be one of its top long-term goals. But Saudi governor Mohammed al-Madi said he believed the world has changed so much in the past few years that it has become a futile exercise to try to do so, sources say. “OPEC should recognize the fact that the market has gone through a structural change, as is evident by the market becoming more competitive rather than monopolistic,” al-Madi told his counterparts inside the meeting, according to sources familiar with the discussions.

U.S. crude inventories will expand to a record 550 million barrels this month before starting their seasonal slide, according to a forecast by Citigroup. Stockpiles rose 2.8 million barrels to 543.4 million last week, the most in more than 86 years, according to data from the Energy Information Administration. Inventories reached the highest ever at 545.2 million barrels in October 1929, according to monthly EIA data.

The shut down of energy facilities accelerated Thursday, taking off line about one million barrels – close to 40% – of Alberta’s daily oilsands production, as a wildfire that started near Fort McMurray spread south to new producing areas. Meanwhile, oil companies poured their resources into the firefighting effort — from sheltering evacuees to helping with medical emergencies. Overnight Wednesday, the raging fire forced the evacuation of smaller communities south of Fort McMurray, where many evacuees fleeing the flames this week had taken shelter. They joined residents of Fort McMurray, who were ordered to leave their homes earlier in the week.

“Based on press releases and our discussions with producers, the fires have impacted oilsands production by an estimated 0.9 to 1 million b/d – disproportionately weighted towards synthetic crude oil,” Greg Pardy, co-head of global energy research at RBC Dominion Securities, said in a report. “This would constitute about 35% to 38% of our 2016 oilsands outlook of 2.6 million b/d.” Steve Laut, president of Canadian Natural Resources, said it was difficult to gauge the long-term impacts of the crisis because it was still evolving. “It’s devastating to the city of Fort McMurray,” he said Thursday after addressing the company’s annual meeting. Many production facilities are located away from the fire, but “it’s really the workers at the mines and the plants who live in Fort McMurray who are impacted,” Laut said. Canadian Natural said its operations at the Horizon mining project were stable.

A catastrophic wildfire that has forced all 88,000 residents to flee Fort McMurray in western Canada grew tenfold on Thursday, cutting off evacuees in camps north of the city and putting communities to the south in extreme danger. Authorities scrambled to organise an airlift of 8,000 people from the camps on Thursday night and hoped to move thousands more to safer areas as the fast-moving fire threatened to engulf huge areas of the arid western province of Alberta. Officials said 25,000 people had taken shelter in the oilsands work camps when the fires engulfed the city. The remaining 17,000 would have to wait until fuel reserves were refilled and the opening of a main highway to drive themselves south. The out-of-control blaze has burned down whole neighborhoods of Fort McMurray in Canada’s energy heartland and forced a precautionary shutdown of some oil production, driving up global oil prices.

The Alberta government, which declared a state of emergency, said more than 1,100 firefighters, 145 helicopters, 138 pieces of heavy equipment and 22 air tankers were fighting a total of 49 wildfires, with seven considered out of control. Three days after the residents were ordered to leave Fort McMurray, firefighters were still battling to protect homes, businesses and other structures from the flames. More than 1,600 structures, including hundreds of homes, have been destroyed. “The damage to the community of Fort McMurray is extensive and the city is not safe for residents,” said Alberta premier Rachel Notley in a press briefing on Thursday night, as those left stranded to the north of the city clamoured for answers. “It is simply not possible, nor is it responsible to speculate on a time when citizens will be able to return. We do know that it will not be a matter of days,” she added.

A pivotal deal to staunch the flow of migrants from Turkey into the EU, masterminded by Angela Merkel, German chancellor, is in doubt after Turkey’s pro-European prime minister resigned. Ahmet Davutoglu, who personally negotiated the deal with Ms Merkel, quit on Thursday following a power struggle with President Recep Tayyip Erdogan. The premier’s departure imperils an agreement credited with sharply reducing the influx of asylum-seekers into the EU – and rescuing Ms Merkel from a potentially fatal political backlash. The deal enables the EU to send migrants arriving illegally on the Greek islands back to Turkey in exchange for visa requirements on Turkish visitors being eased and financial aid. However, President Erdogan has responded coolly towards the agreement struck by his premier and has shown increasing hostility towards the EU.

Without reforms to Turkey’s antiterrorism and anti-corruption laws, which Mr Erdogan has angrily resisted, Brussels may be unable to grant some of the most important concessions in the deal — a move that Ankara has already warned would cancel its obligation to curtail refugee crossings into Greece. “We’ve made good progress on the agreement with Turkey,” Ms Merkel said in Rome on Thursday. “The European Union, or at least Germany and Italy, are prepared and stand by the commitments that we’ve agreed to. We hope that’s mutual.” To keep the pact on track, Ankara must still meet several benchmarks, including major revisions to its antiterrorism legislation to ensure civil liberties, that Mr Erdogan has been loath to support.

EU officials are now concerned that Ankara will backtrack on reform commitments. “It’s certainly not good news for us,” said the EU official. “Erdogan would be very ill-advised to throw this out of the window and think this is now a matter of horse-trading. He thinks it’s 50% wriggle room, and the rest is all arm-wrestling.” Sinan Ulgen, a former Turkish diplomat at the Carnegie Europe think-tank, said that Mr Erdogan had been “much more categorical” in resisting changes to the antiterrorism law, adding that, with his AK party and parliament in disarray, the chances of reforms being passed in time for a June deadline was becoming increasingly unlikely. When Ms Merkel set out to persuade sceptical EU countries to back the migrant deal, one of her central arguments, according to diplomats, was that it would shore up the pro-European faction in Ankara, led by Mr Davutoglu.

Instead, the deal hastened the demise of her main Turkish ally and left the pro-Europeans seriously weakened. President Erdogan saw Mr Davutoglu’s increasingly close relationship with the EU as a threat. A rift between the two men turned into a power struggle which the prime minister lost. [..] European lawmakers who must now approve the deal say they are becoming increasingly wary. “If this was an isolated incident, you could say it’s just an internal affair,” said Marietje Schaake, a Dutch liberal who has become a leading voice on Turkey in the European parliament. “But we’ve seen a series of incidents that are clearly a pattern towards authoritarianism. It’s time the EU starts to connect the dots and see it for what it is.”

German Chancellor Angela Merkel on Thursday urged European leaders to protect EU borders or risk a “return to nationalism” as the continent battles its worst migration crisis since World War II. As Italian Prime Minister Matteo Renzi kicked off two days of talks in Rome with Merkel and senior EU officials, the German leader said Europe must defend its borders “from the Mediterranean to the North Pole” or suffer the political consequences. Support for far-right and anti-immigrant parties is on the rise in several countries on the continent which saw more than a million people arrive on its shores last year. In Austria, Norbert Hofer of the far-right Freedom Party is expected to win a presidential run-off on May 22 after romping to victory in the first round on an anti-immigration platform.

Merkel told a press conference with Renzi that Europe’s cherished freedom of movement is at threat, with ramped-up border controls in response to the crisis raising questions over whether the passport-free Schengen zone can survive. With over 28,500 migrants arriving since January 1, Italy has once again become the principal entry point for migrants arriving in Europe, following a controversial EU-Turkey deal and the closure of the Balkan route up from Greece. In previous years, many migrants landing in Italy have headed on to other countries – but with Austria planning to reinstate border controls at the Brenner pass in the Alps, a key transport corridor, Rome fears it could be stuck hosting masses of new arrivals. Renzi lashed out at Austria on Thursday, describing Vienna’s position as “anachronistic”.

A quarter of all child refugees who arrived in Europe last year – almost 100,000 under-18s – travelled without parents or guardians and are now “geographically orphaned”, presenting a huge challenge to authorities in their adopted countries. A total of 1.2 million people sought asylum in the EU in 2015, 30% of whom – almost 368,000 – were minors. The number of children arriving in Europe last year was two-and-half times that recorded a year earlier, and almost five times as many as in 2012. But the most staggering statistic is that a quarter of the young arrivals were unaccompanied. In all, 88,695 children completed the dangerous journey without their parents – an average of 10 arriving every hour. The highest proportion of child refugees last year were Syrian, followed by Afghans and Iraqis. Together these three nationalities accounted for 60% of all minors seeking asylum in the EU.

In absolute terms, Germany received the highest number of child refugees, taking in more than 137,000 in 2015. However, as a proportion of population Sweden took in the most. Half of the unaccompanied minors came from Afghanistan, and one in seven were Syrian. More unaccompanied minors hailed from Eritrea (5,140) than from Iraq (4,570). Sweden took the highest number of lone children, 35,000 in total, two-thirds of them from Afghanistan. It also recorded the highest number of unaccompanied minors per head of population, followed by Austria and Hungary. It is not possible to get a full picture of how many children have sought asylum in Europe so far in 2016, as several countries have not yet published figures for the first quarter of the year. But the number of child asylum applicants recorded in Europe in January and February already far exceeds that recorded in the same months of 2015.

Mario Draghi made another huge faux pas Thursday, but it looks like the entire world press has become immune to them, because it happens all the time, because they don’t realize what it means, and because they have a message if not a mission to sell. But still, none of these things makes it alright. Nor does Draghi’s denying it was a faux pas to begin with.

And while that’s very worrisome, ‘the public’ appear to be as numbed and dumbed down to this as the media themselves are -largely due to ’cause and effect’, no doubt-. We saw an account of a North Korean defector yesterday lamenting that her country doesn’t have a functioning press, and we thought: get in line.

It’s one thing for the Bank of England to research the effects of a Brexit. It’s even inevitable that a central bank should do this, but both the process and the outcome would always have to remain under wraps. Why it was ‘accidentally’ emailed to the Guardian is hard to gauge, but it’s not a big news event that such a study takes place. The contents may yet turn out to be, but that doesn’t look all that likely.

The reason the study should remain secret is, of course, that a Brexit is a political decision, and a country’s central bank can not be party to such decisions.

It’s therefore quite another thing for ECB head Mario Draghi to speak in public about reforms inside the eurozone. Draghi can perhaps vent his opinion behind closed doors, for instance in talks with politicians in European nations, but any and all eurozone reforms remain exclusively political decisions, even if they are economic reforms, and therefore Draghi must stay away from the topic, certainly in public. Far away.

There has to be a very clear line between central banks and governments. The latter should never be able to influence the former, because it would risk making economic policy serve only short term interests (until the next election). Likewise the former should stay out of the latter’s decisions, because that would tend to make political processes skewed disproportionally towards finance and the economy, at the potential cost of other interests in a society.

This may sound idealistic and out of sync with the present day reality, but if it does, that does not bode well. It’s dangerous to play fast and loose with the founding principles of individual countries, and perhaps even more with those of unions of sovereign nations.

Obviously, in the same vein it’s fully out of line for German FinMin Schäuble to express his opinion on whether or not Greece should hold a referendum on euro membership, or any referendum for that matter. Ye olde Wolfgang is tasked with Germany’s financial politics, not Greece’s, and being a minister for one of 28 EU members doesn’t give him the liberty to express such opinions. Because all EU nations are sovereign nations, and no foreign politicians have any say in other nations’ domestic politics.

It really is that simple, no matter how much of this brinkmanship has already passed under the bridge. Even Angela Merkel, though she’s Germany’s political leader, must refrain from comments on internal Greek political affairs. She must also, if members of her cabinet make comments like Schäuble’s, tell them to never do that again, or else. It’s simply the way the EU was constructed. There is no grey area there.

The way the eurozone is treating Greece has already shown that it’s highly improbable the union can and will last forever. Too many -sovereign- boundaries have been crossed. Draghi’s and Schäuble’s comments will speed up the process of disintegration. They will achieve the exact opposite of what they try to accomplish. The European Union will show itself to be a union of fairweather friends. In Greece, this is already being revealed.

The eurozone, or European monetary union, has now had as many years of economic turmoil as it’s had years of prosperity. And it’ll be all downhill from here on in, precisely because certain people think they can afford to meddle in the affairs of sovereign nations. The euro was launched on January 2002, and was in trouble as soon as the US was, even if this was not acknowledged right away. Since 2008, Europe has swung from crisis to crisis, and there’s no end in sight.

At the central bankers’ undoubtedly ultra luxurious love fest in Sintra, Portugal, where all protagonists largely agree with one another, Draghi on Friday held a speech. And right from the start, he started pushing reforms, and showing why he really shouldn’t. Because what he suggests is not politically -or economically- neutral, it’s driven by ideology.

He can’t claim that it’s all just economics. When you talk about opening markets, facilitating reallocation etc., you’re expressing a political opinion about how a society can and should be structured, not merely an economy.

Our strong focus on structural reforms is not because they have been ignored in recent years. On the contrary, a great deal has been achieved and we have praised progress where it has taken place, including here in Portugal. Rather, if we talk often about structural reforms it is because we know that our ability to bring about a lasting return of stability and prosperity does not rely only on cyclical policies – including monetary policy – but also on structural policies. The two are heavily interdependent.

So what I would like to do today in opening our annual discussions in Sintra is, first, to explain what we mean by structural reforms and why the central bank has a pressing and legitimate interest in their implementation. And second, to underline why being in the early phases of a cyclical recovery is not a reason to postpone structural reforms; it is in fact an opportunity to accelerate them.

Structural reforms are, in my view, best defined as policies that permanently and positively alter the supply-side of the economy. This means that they have two key effects. First, they lift the path of potential output, either by raising the inputs to production – the supply and quality of labour and the amount of capital per worker – or by ensuring that those inputs are used more efficiently, i.e. by raising total factor productivity (TFP).

And second, they make economies more resilient to economic shocks by facilitating price and wage flexibility and the swift reallocation of resources within and across sectors. These two effects are complementary. An economy that rebounds faster after a shock is an economy that grows more over time, as it suffers from lower hysteresis effects. And the same structural reforms will often increase both short-term flexibility and long-term growth.

And earlier in the -long- speech he said: “Our strong focus on structural reforms is not because they have been ignored in recent years. On the contrary, a great deal has been achieved and we have praised progress where it has taken place, including here in Portugal.

So Draghi states that reforms have already been successful. Wherever things seem to go right, he will claim that’s due to ‘his’ reforms. Wherever they don’t, that’s due to not enough reforms. His is a goalseeked view of the world.

He claims that the structural reforms he advocates will lead to more resilience and growth. But since these reforms are for the most part a simple rehash of longer running centralization efforts, we need only look at the latter’s effects on society to gauge the potential consequences of what Draghi suggests. And what we then find is that the entire package has led to growth almost exclusively for large corporations and financial institutions. And even that growth is now elusive.

Neither reforms nor stimulus have done much, if anything, to alleviate the misery in Greece or Spain or Italy, and Portugal is not doing much better, as the rise of the Socialist Party makes clear. The reforms that Draghi touts for Lisbon consist mainly of cuts to wages and pensions. How that is progress, or how it has made the Portuguese economy ‘more resilient’, is anybody’s guess.

Resilience cannot mean that a system makes it easier to force you to leave your home to find work, but that is exactly what Draghi advocates. Instead, resilience must mean that it is easier for you to find properly rewarded work right where you are, preferably producing your own society’s basic necessities. That is what would make your society more capable of withstanding economic shocks.

Still, it’s the direct opposite of what Draghi has in mind. Draghi states that [structural reforms] “.. make economies more resilient to economic shocks by facilitating price and wage flexibility and the swift reallocation of resources within and across sectors.”

That obviously and simply means that, if it pleases the economic elites who own a society’s assets, your wages can more easily be lowered, prices for basic necessities can be raised, and you yourself can be ‘swiftly reallocated’ far from where you live, and into industries you may not want to work in that don’t do anything to lift your society.

Whether such kinds of changes to your society’s framework are desirable is manifestly a political theme, and an ideological one. They may make it easier for corporations to raise their bottom line, but they come at a substantial cost for everyone else.

Draghi tries to push a neoliberal agenda even further, and that’s a decidedly political agenda, not an economic one.

There was a panel discussion on Saturday in which Draghi defended his forays into politics, and he was called on them:

The ECB president on Saturday said his calls were appropriate in a monetary union where growth prospects had been badly damaged by governments’ resistance to economic reforms. Mr Draghi said it was the central bank’s responsibility to comment if governments’ inaction on structural reforms was creating divergence in growth and unemployment within the eurozone, which undermined the existence of the currency area. “In a monetary union you can’t afford to have large and increasing structural divergences,” the ECB president said. “They tend to become explosive.”

He even claims it’s his responsibility to make political remarks….

Mr Draghi’s defence of the central bank came after Paul De Grauwe, an academic at the London School of Economics, challenged his calls for structural reforms earlier in the week. Mr De Grauwe said central banks’ push for governments to take steps that removed people’s job protection would expose monetary policy makers to criticism over their independence to set interest rates.

The ECB president [..] said central banks had been wrong to keep quiet on the deregulation of the financial sector. “We all wish central bankers had spoken out more when regulation was dismantled before the crisis,” Mr Draghi said. A lack of structural reform was having much more of an impact on poor European growth than in the US, he added.

De Grauwe is half right in his criticism, but only half. It’s not just about the independence to set interest rates, it’s about independence, period. A central bank cannot promote a political ideology disguised as economic measures. It’s bad enough if political parties do this, or corporations, but for central banks it’s an absolute no-go area.

Pressure towards a closer economic and monetary union in Europe is doomed to fail because it cannot be done without a closer political union at the same time. They’re all the same thing. They’re all about giving up sovereignty, about giving away the power to decide about your own country, society, economy, your own life. And Greeks don’t want the same things as Germans, nor do Italians want to become Dutch.

Because of Greece, many EU nations are now increasingly waking up to what a ‘close monetary union’ would mean, namely that Germany would be increasingly calling the shots all over Europe. No matter how many technocrats Brussels manages to sneak into member countries, there’s no way all of them would agree, and it would have to be a unanimous decision.

Draghi’s remarks therefore precipitate the disintegration of Europe, and it would be good if more people would recognize and acknowledge that. Europe are a bunch of fairweather friends, and if everyone is not very careful, they’re not going to part ways in a peaceful manner. The danger that this would lead to the exact opposite of what the EU was meant to achieve, is clear and present.

In America, you’re presumed innocent until proven guilty. Unless you’re poor, that is. Increasingly, it’s a crime to be poor, and the punishment is often further impoverishment. Fifty years ago, Chuck Berry sang about a brown-eyed handsome man who was “arrested for the crime of unemployment.” Little has changed since then. For poor people, even minor scrapes with the law can have major consequences, including prison time, probation, endless debt and permanent joblessness. For people of means, those same legal problems are a nuisance, but they aren’t life-changing events. More cities and states have realized that poverty can be a profit center.

Not for poor people, of course, but for government treasuries and for private companies hired to handle the influx into the criminal justice system of people whose only crime was the inability to pay a traffic ticket or a misdemeanor fine. Cash-strapped cities like Ferguson, Mo., count on fines and court-imposed fees to balance their budgets, and that reliance on the revenue from petty violations was cited by the Justice Department as a contributing factor in Ferguson’s high rates of traffic stops and arrests for minor crimes and misdemeanors. In many states, offenders are expected to finance the justice system, including court costs, room and board while incarcerated, probation supervision and drug-treatment programs.

For anyone living paycheck to paycheck, even a $100 fine can be a challenge, and paying off the debt to the court and to the privatized probation company can be impossible, especially if the arrest has led to the loss of a job or a driver’s license. Just being arrested can be devastating: Half a million people are languishing in jail awaiting trial because they can’t afford to pay the bail. People who are let out of prison are often said to have “paid their debt to society.” But in most cases, they haven’t paid their debt for the costs of their imprisonment and probation. More than 80% of people let out of prison leave owing money, according to an investigation by NPR and the Brennan Center for Justice. Those of us who live sheltered middle-class lives often wonder why anyone would run away from the police or resist arrest.

Running away can cost you your life, as what happened to Walter Scott. Why would he risk being shot in the back by a police officer? Perhaps he feared that an arrest for a minor traffic violation (the tail light on his car was out) would lead to a downward spiral of fines, jail time and permanent joblessness, as it has for others. According to relatives, Scott was behind on his child-support payments, and he may have feared that he’d be jailed for his failure to pay. Which, of course, would have cost him his job and any chance he and his family had of a future. So he ran, and he died.

U.S. states, still grappling with the lingering effects of the longest recession since the 1930s, are even more vulnerable to another fiscal shock. The governments have a little more than half the reserves they’d stashed away before the 18-month recession that ended in June 2009, according to a report last month by Pew Charitable Trusts. New Jersey, Pennsylvania, Illinois and Arkansas have saved the least. Skimpier rainy-day funds have implications for the national economy, which is in its sixth year of expansion. States would have to cut spending or raise revenue by a combined $21 billion in the event of a recession, exacerbating economic weakness, Moody’s found in a stress test of state finances. Reserves take on added importance for governments balancing obligatory pension and health-care costs with swings in tax collections, said Daniel White at Moody’s.

“What the Great Recession has shown is that things have fundamentally changed in terms of the way that state fiscal conditions are determined,” White said. “They need to be much more prepared for very volatile fiscal conditions than they had been in the past.” Investors are monitoring states’ fiscal balances after seeing how reserves helped some governments weather the recession, said John Donaldson at Haverford Trust. California won credit upgrades and saw borrowing costs shrink after voters in November agreed to bolster rainy-day funds. With Fitch Ratings lifting California to A+ in February, its fifth-highest level, the state has its highest marks from the three biggest rating companies since at least 2009.

Bond buyers demand about 0.3 percentage point of extra yield to own 10-year California munis instead of benchmark debt, close to the lowest spread since 2007, data compiled by Bloomberg show. “We’re looking for stability and credit quality,” said Richard Ciccarone at Merritt Research. “A rainy-day fund is a symbol of conservative financial management.” States were unprepared for the last recession. In 2009, budget gaps totaled $117 billion, about twice the level of reserves, according to Pew, a research group. With more of a cushion, they would’ve cut fewer jobs, White said. The governments employ about 5.1 million nonfarm workers, about 140,000 fewer than the 2008 peak, Bureau of Labor Statistics data show.

As if watching your paycheck stagnate for the last couple years hasn’t been bad enough, Federal Reserve researchers are out with more (potentially) bad news: Unless we get some big shifts in global economic forces, your wages could be weak for a while. Longer-term changes including soft productivity growth and labor’s declining share of income are at the heart of the problem, Filippo Occhino and Timothy Stehulak at the Cleveland Fed find. These two macroeconomic shifts, which result from broad themes such as globalization and technology, are felt all the way down to the U.S. worker. Productivity is important because it fosters faster economic growth without generating higher inflation. Companies can pay their workers more while still seeing their earnings increase.

Labor productivity — measured as the amount of goods or services produced by an employee in one hour — has averaged 1.5% growth in the 10 years ended 2014. That compares with 3.6% from the second quarter of 1997 to the end of 2003 — the salad days of American productivity. Gains in productivity have been slow to come by as companies hold off on investing in new capital equipment. Some economists such as Robert Gordon have argued that the U.S. is doomed to stagnant growth, with the low-hanging fruit of big technological innovations, such as the steam engine, all picked.

Another factor keeping wage growth depressed is labor’s declining share of income, the Fed authors note. While it’s been on the downtrend for years, “the evolution of the technology used to produce goods and services, increased globalization and trade openness, and developments in labor market institutions and policies” have exacerbated it since 2000, likely holding down wage growth, they wrote. The faster decrease since then has shaved 0.4 percentage point each year from average real wage growth, compared to the period before 2000.

Central bank financial repression results in the systematic and severe mispricing of financial assets. And that has sweeping consequences far beyond the munificent windfalls it bestows on the thin slice of mankind that frequents the casinos of Wall Street, London, Tokyo and Shanghai. The fact is, the prices of money, debt, equity, traded commodities and all their derivatives comprise a vast and instantaneous signaling system that cascades through every nook and cranny of the real economy. When these signals are systematically falsified by a few dozen central bankers they cause hundreds of millions of ordinary businessmen, workers, investors and entrepreneurs to alter their economic calculus. And not in a good way. False signals lead to mistakes, excesses, losses and waste.

They ultimately reduce economic efficiency and productivity and lower the rate of economic growth and real wealth gains. Since the Greenspan age of financial repression incepted in the late 1980s, for example, the returns to savings have been obliterated while the rewards for speculation have soared. That’s important because only savings from current production and income generate additional primary capital that can foster future wealth. By contrast, leveraged speculation merely causes existing financial assets to be re-priced and a temporary redistribution of paper wealth from the cautious to the gamblers. In an honest free market, in fact, there is no excess return to leveraged speculation at all.

Natural market makers arbitrage out the spread between the costs of carry and the returns to carried assets such as long-dated futures contracts, term debt and various and sundry forms of equity and other risk assets. A relative handful of market makers can make a decent living arbing an honest market, but the mass of investors can not speculate their way to wealth. The latter can happen only when the central bank has its big fat thumb on the financial scales, pressing the cost of carry – that is, leveraged financial gambling – toward the zero bound.

People are constantly exhorted to save, but as soon as they do, economists pop up to complain they aren’t spending enough to keep the economy growing. A new blogger named Ben Bernanke wrote on April 1 that there’s still a “global savings glut.” Two days later the Bureau of Labor Statistics announced the weakest job growth since 2013, which economists quickly attributed to soft consumer spending. The U.S. personal savings rate—5.8% in February—is the highest since 2012. “After years of spending as if there were no tomorrow, consumers are now saving like there is a tomorrow,” Richard Moody, chief economist at Regions Financial, wrote to clients in March. Saving too much really can be a problem when spending is weak.

There are only two things you can do with a dollar, after all: spend it or save it. If you spend it, great—that’s money in someone else’s pocket. If you save it, the financial system is supposed to recycle your dollar into productive investment with loans for new houses, factories, software, and research and development. But if no one’s in the mood to invest more and interest rates are already as low as they can go (as they are in much of the world), the compulsion to save can sap demand and throw people out of work. For the U.S. economy, the good news is that the jump in the personal savings rate is probably no more than a blip. Three economists from Deutsche Bank Securities in New York explained why in a March 25 report called U.S. Consumers: Still Shopping, Not Dropping.

While noting a “deceleration” in consumer spending, they wrote, “we think that concerns about the outlook for the consumer are overstated.” Their model of the U.S. economy predicts the savings rate will fall to 3% to 3.5% by 2017. Other economists have also concluded that the spending dropoff is temporary, which is why the slowdown in job growth, to just 126,000 in March, didn’t set off many alarm bells. “Consumer spending is starting to look more and more like a coiled spring,” says Guy Berger, U.S. economist at RBS Securities. One sign that consumers aren’t retrenching: On April 7 the Federal Reserve reported that consumer credit rose $15.5 billion in February, in line with the recent past.

China’s steel and metals markets, a barometer of the world’s second-biggest economy, are “a lot worse than you think,” according to a Bloomberg Intelligence analyst who just completed a tour of the country. What he saw: idle cranes, empty construction sites and half-finished, abandoned buildings in several cities. Conversations with executives reinforced the “gloomy” outlook. “China’s metals demand is plummeting,” wrote Kenneth Hoffman, the metals analyst who spent a week traveling across the country, meeting with executives, traders, industry groups and analysts. “Demand is rapidly deteriorating as the government slows its infrastructure building and transforms into a consumer economy.”

The China Steel Profitability Index compiled by Bloomberg Intelligence barely rose in March, a time after the annual Lunar New Year when demand would usually surge, and so far this month has resumed its decline. Steel use this year is down 3.4%, after slumping as much as 4% in 2014, according to BI. It had steadily risen for more than a decade. Prices for commodities from iron ore to coal are sinking as China’s leadership tries to steer the economy away from debt-fueled property investment and smokestack industries, embracing services and domestic-led consumption. At the same time, President Xi Jinping is stepping up efforts to combat pollution, further squeezing industry. Deteriorating economic data has led traders and analysts to speculate that China’s central bank will act to revive growth.

The bank has said it will keep an “appropriate balance between loosening and tightening” of interest rates. It has cut interest rates twice since November and lowered lenders’ reserve-requirement ratios once. Economists are forecasting 7% growth in China for this year, in line with government targets and down from 7.4% in 2014, according to the median of 59 estimates compiled by Bloomberg. That’s about half the last decade’s peak rate of 14.2% in 2007. The slowing steel and metals activity suggests the outlook could be grimmer. “There is a big fear this is going to get worse before it gets better,” Hoffman said in an interview. “It’s as bad as the data looks, if not worse.”

IMF Managing Director Christine Lagarde says the world could be in for a “bumpy ride” when the Federal Reserve starts raising interest rates, with overpriced markets and emerging economies likely to take the biggest hits. While risks to the global economy have decreased over the last six months, threats to the world’s financial system have actually risen, Lagarde said on Thursday ahead of next week’s spring meetings of the IMF and World Bank in Washington. A long period of low interest rates in the U.S. and other advanced economies has fostered a higher risk tolerance among investors, “which can lead to overpricing” and could pose “solvency challenges” for life insurers and defined-benefit pension fund, she said.

Lagarde, 59, warned that “liquidity can evaporate quickly if everyone rushes for the exit at the same time – which could, for example, make for a bumpy ride when the Federal Reserve begins to raise short-term rates,” she said the text of a speech at the Atlantic Council in Washington. The turbulence could be especially rough for commodity-exporting emerging economies, which may find themselves caught between falling prices for their goods and a stronger dollar, which increases the burden of dollar-dominated debt, she said. Lagarde’s warning comes as Fed policy makers led by Chair Janet Yellen consider when to raise their benchmark lending rate amid a strengthening labor market, which has pushed U.S. unemployment to the lowest level since May 2008.

The dollar has appreciated 19% over the last year as the U.S. economy has strengthened. The risk is that a surging greenback and higher interest rates will make it harder to service U.S.-denominated debt held outside the country by non-bank borrowers. This debt is estimated at $9 trillion by the Bank for International Settlements. Lagarde urged policy makers to take steps to ensure that markets have enough liquidity, improve prudential policies for non-banks, and follow through on regulatory reforms such as shielding “too-big-to-fail” institutions.

The Lenape tribe got a better deal on the sale of Manhattan island than New York City’s pension funds have been getting from Wall Street, according to a new analysis by the city comptroller’s office. The analysis concluded that, over the past 10 years, the five pension funds have paid more than $2 billion in fees to money managers and have received virtually nothing in return, Comptroller Scott M. Stringer said in an interview on Wednesday. “We asked a simple question: Are we getting value for the fees we’re paying to Wall Street?” Mr. Stringer said. “The answer, based on this 10-year analysis, is no.” Until now, Mr. Stringer said, the pension funds have reported the performance of many of their investments before taking the fees paid to money managers into account.

After factoring in those fees, his staff found that they had dragged the overall returns $2.5 billion below expectations over the last 10 years. “When you do the math on what we pay Wall Street to actively manage our funds, it’s shocking to realize that fees have not only wiped out any benefit to the funds, but have in fact cost taxpayers billions of dollars in lost returns,” Mr. Stringer said. Why the trustees of the funds — Mr. Stringer included — would not have performed those calculations in the past is not clear. Mr. Stringer, who was a trustee of one of the funds when he was Manhattan borough president before being elected comptroller, said the returns on investments in publicly traded assets, mostly stocks and bonds, have traditionally been reported without taking fees into account.

The fees have been disclosed only in footnotes to the funds’ quarterly statements, he said. The stakes in this arena are huge. The city’s pension system is the fourth largest in the country, with total assets of nearly $160 billion. It holds retirement funds for about 715,000 city employees, including teachers, police officers and firefighters. Most of the funds’ money – more than 80% – is invested in plain vanilla assets like domestic and foreign stocks and bonds. The managers of those “public asset classes” are usually paid based on the amount of money they manage, not the returns they achieve. Over the last 10 years, the return on those “public asset classes” has surpassed expectations by more than $2 billion, according to the comptroller’s analysis. But nearly all of that extra gain — about 97% — has been eaten up by management fees, leaving just $40 million for the retirees, it found.

One could argue that China’s long path to Piraeus, Greece, began on April 27, 1961. It’s the day Mao Zedong founded the communist state’s first freight company, the China Ocean Shipping Company (COSCO). The Great Leap Forward, Mao’s plan for industrialization, had proven to be a disaster at the time, leaving millions dead or starving. With Cosco, China had its eyes on overseas markets. Almost 54 years later, the company is steering toward a major prize in Greece. After lengthy wavering, the Greek government – comprised of Prime Minister Alexis Tsipras, his far-left Syriza party and the right-wing populist Independent Greeks – has announced it will be selling the majority of its share in Athens’ Piraeus Port Authority. So far, Cosco is the most promising bidder.

Throughout, Fu Cheng Qui, or “Captain Fu,” as the chief executive of Cosco’s Piraeus subsidiary is called by those who know him, will be closely monitoring the bidding process. Fu has already been in Piraeus for a long time with the company, and he is determined to stay. He has placed the bid on behalf of his company and has little doubt it will be accepted. In his position, 65-year-old Fu is the guardian of China’s gateway to Europe. He may soon control the container piers, cruise-ship terminals and ferry quays of Greece’s biggest port. “The government has changed four times since I have been in Greece,” Fu says. “They all always talk a lot. But what counts? Actions count. Actions! Only actions!”

On the way to the cargo port, a small sign indicates a fork in the road – with one route leading to OLP and the other to PCT. Each to a different world. Pier I belongs to the primarily Greek state-owned OLP port authority. These days, though, most trucks take the other route, to PCT, to pier II and pier III, which is run by Piraeus Container Terminal, a subsidiary of Cosco. “Just look,” Fu says as he steps up to the window. Then the show begins. On Pier II, 11 container gantry cranes are in constant, powerful movement. All are new and made in China. Trucks move across the ground at an interval of only minutes.

In an interview with Bloomberg TV at the Institute for New Economic Thinking earlier today, Greek Finance Minister Yanis Varoufakis said he is confident that an agreement will be reached later this month. He identified three pre-conditions for such a deal.

• “Prioritize deep reforms that will deal with the malignancy of the Greek social economy, of the Greek state.”

• “Deal with the ill effects of a five-year catastrophic recession.”

• “A resolution of long term, sustainable fiscal plan that involves three elements. One has to do with appropriate primary surpluses, so we need primary surplus. We never are going to fall back into primary deficits again, but at the same time this should not be excessive because it will crush the private sector. We need a sensible policy for crowding in private investment and that must involve a package of public investment..from some kind of European authority or institution that will help with the process of crowding in private investment..and a rationalization on the different slices of the Greek debt without any haircuts for anyone but in a way that maximizes the amount of value that our creditors will get back from the Greek state.”

He ended the interview by saying that compromises are to be expected, but he is not ready to be compromised. “We wouldn’t be fit for the purpose if we were not prepared to take the political costs which are necessary to stabilize Greece and lead it to growth, but let me be very precise on this, we are prepared to make all sorts of compromises, we are not prepared to be compromised.”

Greek Finance Minister Yanis Varoufakis said his country isn’t looking outside Europe to resolve its financial crisis, adding that he’s confident of reaching an agreement with European partners this month. Asked about a meeting between Prime Minster Alexis Tsipras and Russian President Vladimir Putin Wednesday, Varoufakis denied any links with talks Greece is holding with euro-area governments that are the country’s creditors. “We should be very clear: our bailout fallout needs to be dealt with in the European family,” Varoufakis said in an interview with Bloomberg Television in Paris. “This government is not seeking an extra-European solution to a European problem.”

Greece, Europe’s most-indebted state, is negotiating with euro-area countries and the IMF on the terms of its €240 billion rescue. The standoff, which has left Greece dependent upon ECB loans, risks leading to a default within weeks and the country’s potential exit from the euro area. The ECB approved a €1.2 billion increase in the emergency funds available to Greek lenders Thursday, a person familiar with the decision said. The Governing Council raised the cap on Emergency Liquidity Assistance provided by the Bank of Greece to €73.2 billion in a telephone conference, said the person who asked not to be named because the decision is confidential.

Greek officials said this week they are targeting an April 24 meeting of euro-area finance ministers as a deadline for approving new money. A looming cash crunch in the summer, when the ECB needs to be repaid, means a new bailout deal will be needed before then.
“I am very confident,” Varoufakis said, when asked about the talks. “The negotiations are proceeding quite well. It is in our mutual interest to strike a deal by the 24th and I’m sure we will.”

Greece met a loan payment of €459 million to the IMF on Thursday, according to reports, as the EU discusses whether the country has reformed enough to merit a further cash injection. “The payment order has been given,” a finance ministry source told AFP. But no one is quite sure where the money came from – a consequence of the opaque Greek finance system. There are few trained accountants in the country and they do not adhere to international accounting standards, so records are thin and many citizens do not pay tax. Poor accounting standards are blamed by some for the uncertain numbers that have come out of Greece regarding the country’s debt.

Athens is aware of the tax problem. It promised to hire tourists and cleaners as part time tax inspectors in a recent round of reforms drawn up to meet EU criteria for further cash. The latest IMF payment was ordered at the same time as Greek Prime Minister Alex Tsipras met Putin in Moscow to discuss co-operation between the two orthodox Catholic nations. While both parties denied that Greece had financial aid had been requested, the two sides are said to have talked about extending a Turkish natural gas pipeline through Greece and relief from Russian sanctions on European food produce. Russian investment in key Greek infrastructure, including the port of Thessaloniki, is also in discussion.

Greek finance minister Yanis Varoufakis said during a visit to Washington this week that Greece would meet the April 9 payment and every other until the debts are cleared. He still has some way to go – next month, Athens owes a further €950 million to the IMF. Over €2 billion euros in six- and three-month treasury bills are also due to mature on April 14 and 17 – though they should roll on to the next maturity without incurring further cost. This week Athens raised another €1.14 billion in six-month Treasury bills and announced a further sale of €625 million next week. The country is dependent on such short terms bonds to raise cash, but the takers are mostly domestic investors because Greece is shut out of international debt markets.

Companies doing business in Russia have been on a roller coaster ride for the last year. The combination of Western sanctions, a weakened currency and continued geopolitical uncertainty have threatened even the most robust of balance sheets. Yet amid these headline-grabbing harbingers of new challenges in Russia’s business environment, one seems to have gone largely overlooked: last September, Russian lawmakers passed unprecedented changes to their country’s corporate legislation. The aim was to update business legal frameworks and to extend additional protections to minority corporate stakeholders, but it remains uncertain whether the law will have the desired effect. The sweeping changes generally affect the rules for how companies and their stakeholders interact. They also overhaul the different classes of legal entities that are permitted to do business. Some highlights:

• All Russian legal entities are reclassified. Previously, entities were conceptually seen as either for-profit and “commercial” or “non-commercial,” today all organizations are split between the “unitary” and “corporate” categories. A “unitary” organization’s founder does not directly participate in the business’s affairs or ownership, while the founder of a “corporate” entity retains the right to remain a shareholder or manager.
• The rules for joint stock companies have changed. Companies were previously classified as open or closed, according to whether new shareholders could legally enter the company’s ownership structure. Now they are classified as public or non-public. The option to publicly trade their securities or shares distinguishes the former, who must accordingly include the word “public” in their name. All other corporation types, including the non-trading joint stock companies, are non-public by default and face no need to alter their names. Notably, the obsolescent open and closed joint stock companies do not have to reclassify themselves by the new guidelines until they have to alter their charter documents, but must comply with the new rules regardless.

Investors looking for a bottom in oil prices argue that a deal to curb Iran’s nuclear program and ease sanctions against the country won’t flood the market with more unwanted crude. But one analyst thinks Iran’s return to the market would continue to keep a lid on prices. Oil futures plunged Wednesday as U.S. crude inventories rose yet again. But oil had rallied earlier this week on ideas that fears Iran would soon be able to dump more supply on the market had been overdone. After all, a final deal isn’t due until June 30—and that deadline could easily slip. Moreover, Iran’s degraded infrastructure is likely to keep a lid on production even if a deal is struck, analysts said.

Of course, the likelihood of a deal remains up for debate. Iran’s supreme leader declared Thursday that there was no guarantee of a final agreement, saying world powers couldn’t be trusted to negotiate in good faith. Vikas Dwivedi, a Houston-based oil and gas strategist at Macquarie Capital, sounds far from convinced that a return to the market by Iran would be taken in stride. Making a pun on a 1982 New Wave hit, Dwivedi wrote a note this week entitled “Iran Not So Far Away, Dwivedi argues that Iran would be able to ramp up production significantly in the weeks after the final approval of a deal. But the real pressure, he says, might come from how Arab Gulf producers respond.

Dwivedi says Iran would be able to grow production and exports by 300,000 to 400,000 barrels a day within weeks of a final deal, but that the need for substantial capital upgrades to Iran’s reservoirs means it would take another six to nine months to ramp up production by the 1 million barrels a day needed to recapture the level of output seen before the sanctions.. Meanwhile, Arab Gulf members of OPEC would probably prove themselves unwilling to cede market share to accommodate rising Iranian output, Dwivedi writes. That means OPEC 2015 production could reach 32 million barrels a day or higher versus a previous call of 28.2 million, Dwivedi said. OPEC supply rose to 30.63 million barrels a day in March, according to a Reuters survey.

The City is slathering with excitement at Shell’s £47bn bid for BG group. Its shareholders are less than impressed. The problem for them is that the price represents a 50 per cent premium to where BG shares languished prior to the deal’s announcement. To make it pay, Shell really needs the oil price to move up to $90, and quickly. The question its investors have to ask themselves is whether Shell could pick up something like BG’s portfolio, the opportunity it represents and the earnings stream it generates, with its existing assets and resources. Even if they think it can, and such an outcome won’t be quick, they still have to ask if they’d be happy for someone else to have BG, the profits of which will at least help to power the generous dividend Shell pays them. A dividend that represents a welter burden to their company.

What is certain is that this will not be the last mega-deal to be done in the energy sector, as its giants seek cheaper alternatives to risking cash they’re not earning on exploration. It likely won’t be the biggest either. BG’s most likely suitor was long rumoured to be Exxon, the American giant, which represents the most likely threat to this deal’s completion. But Exxon may have it’s eyes cast in the direction of an even bigger B in the form of BP. BG’s drift had become sufficiently aimless that its board felt the need to risk shareholders ire by offering an appalling £25m with nary a condition attached to lure Helge Lund from Norway’s Statoil. He’s now going to sail off into the sunset in a boat filled with cash.

BP’s board might wish it had only that to worry about. For the US lawyers ranged against it, the Deepwater Horizon disaster is the gift that keeps on giving. The company is more than half owned by Americans, it is run by one (Bob Dudley), and it has substantial operations in the country. But they still insist on referring to it as “British” Petroleum across the Atlantic. The logic of putting it formally into American hands via the mega-deal to end all mega-deals with Exxon is that it could take an awful lot of feet from off its neck.

Five creditors that own about $10 billion of Ukraine’s bonds are working on a debt-restructuring deal that won’t involve a reduction to their principal holdings as the government seeks to change the terms of its external debt. The committee is working on a plan that “provides Ukraine with the necessary financial liquidity support,” the group said in a statement released by Blackstone. Franklin Templeton, Ukraine’s biggest bondholder with about $7 billion of the nation’s debt, hired Blackstone to represent the creditor group in mid-March, according to Blackstone. Ukraine needs to reach an agreement with creditors by the end of May to save $15.3 billion over four years as a condition for receiving the next tranche of a $17.5 billion IMF loan.

“For sure, the creditors will try to achieve” a deal with no principal reduction, “but realistically it is not viable,” Michael Ganske at Rogge in London, said. “Ukraine’s debt-to-GDP is much too high and the economy is shrinking.” Public-sector debt is set to rise to 94% of gross domestic product this year, according to the IMF, after a yearlong conflict with pro-Russian separatists in the nation’s east crippled its economy. Output shrank 7 to 10% in the first quarter, Finance Minister Natalie Jaresko said on March 24. The country is seeking to restructure at least $21.7 billion, data compiled by Bloomberg News. A price of about 40 cents signals creditors will face writedowns to their principal holdings of about 20%, Bank of America said in March.

Buying a house on the city’s outskirts can save Aucklanders up to $50,000 each year in mortgage repayments, despite the added commuting costs, new figures reveal. The research, carried out by real estate firm Bayleys, factored in the cost of mortgage repayments as well as the cost of travel from the respective areas. Lower house prices in outlying suburbs – like Papakura, New Lynn, Sunnyvale and Manukau – meant even with transport costs homeowners were still paying significantly less than those in city-fringe suburbs. Bayleys calculated the first-year mortgage repayment costs for different suburbs based on median house prices from the Real Estate Institute of New Zealand (REINZ) and the ANZ variable rate of 6.74%.

It found the annual cost of servicing a mortgage for a median priced Orakei or Remuera home ($1.35 million) was $84,060 in the first year. In Pukekohe, where the median price of a home is $500,000, the annual mortgage repayment in the first year would be $31,128. Even factoring in the $4032 annual cost of commuting from Pukekohe to the CBD by train on the At Hop card system – as well as the $768 public transport cost from Orakei to the city – living in the southern suburb was about $50,000 cheaper. Bayleys Research manager Ian Little said even if a Pukekohe resident commuted by car and chose to park in the central city, it was still cheaper.

New Zealand’s government is unlikely to return its budget to surplus this year as it promised ahead of an election in 2014, Finance Minister Bill English said. “Lower inflation, while good for consumers, is making it less likely that the final accounts in October will show a surplus for the whole year,” English said in a statement Friday. The budget showed a NZ$269 million ($203 million) deficit in the eight months ended Feb. 28, the Treasury Department said earlier Friday. Prime Minister John Key won a third term last year, campaigning on his economic management and pledging to post the nation’s first budget surplus in seven years in the 12 months ending June 30, 2015.

In May last year, English projected a surplus of NZ$372 million for 2014-15. The Treasury in December said low inflation, which curbs nominal economic growth and tax revenue, suggested the budget would remain in deficit. English, who delivers his next annual budget May 21, previously said that the Treasury forecasts may be proved wrong by the time the full-year financial statements are prepared in October. Consumer prices rose 0.8% in the fourth quarter from a year earlier and were down 0.2% from the prior three-month period – the first quarterly decline in three years. The central bank last month forecast annual inflation would fall to zero in the first quarter.

Japan will promise to cut its greenhouse gas emissions by 20% from 2013 levels ahead of a global summit on climate change this year, a report said Thursday, despite uncertainty over post-Fukushima energy policy. The government will likely announce the new target at the G7 summit in June in Germany, the leading business daily Nikkei reported, citing unnamed government sources. In a separate report, Kyodo News said Tokyo will set a target of cutting gas emissions “by at least 20% by 2030, from 2005 levels.” Japan is one of the few leading polluters that has not yet declared a target on emission cuts, as the world works towards a new framework for combating climate change, to be finalised at December’s COP 21 gathering in Paris.

A total of 33 countries – including the no.2 emitter the United States, the no.3 emitter the European Union, and Russia, ranked fifth – submitted their reduction goals to the UN secretariat by the end of last month. The US has pledged to reduce greenhouse gas emissions by 26-28% over 2005 levels within the next decade, while the EU said it will cut its pollution by 40% by 2030 from 1990 levels. Russia said it could drive down emissions by up to 30% compared to 1990 levels, subject to conditions. In earlier rounds of climate talks, Tokyo pledged it would reduce its greenhouse gas output by 25% by 2020 from 1990 levels. But that target was slashed to a 3.8% cut from 2005 levels in the aftermath of the 2011 Fukushima nuclear disaster, which led to idling of the country’s entire nuclear stable.

For people who court danger in foreign lands, Chris Catrambone is a good guy to know. Originally from Louisiana, he made his first $10 million before age 30 investigating insurance claims and lining up medical care for injured workers in some of the world’s most violent places, especially contractors of U.S.-owned companies operating in Iraq and Afghanistan. In 2008, at 27, he moved his two-year-old multinational company, the Tangiers Group, to Malta, the island nation in the central Mediterranean that’s been vital to various empires for more than two millennia, and where moorings are as common as parking spots. Tangiers Group’s portfolio includes travel insurance, up-to-date CIA World Factbook-type reports on emerging markets, and hospitalization and evacuations for expats.

In the summer of 2013, with his wife, Regina, and stepdaughter, Maria Luisa, Catrambone chartered a yacht for a trip to the coast of Tunisia with a stop on the Italian island of Lampedusa, a popular vacation spot. It’s also a landing point used by migrants trying to enter Europe illegally. As the Catrambones left the harbor, Regina spotted a parka floating on the waves. It struck her as incongruous—a winter coat being carried by the warm tide—and she asked their captain about it. He replied that it had almost certainly belonged to one of the thousands who’ve attempted a water crossing to Lampedusa from Libya in inflatable dinghies—one who didn’t make it. “Lampedusa has a beach called Rabbit Beach, and every year it’s rated as one of the top beaches in the world, so of course we wanted to visit it,” Chris says.

“But then we learned that there are bodies of refugees literally washing ashore on this most beautiful beach. So what, you’re going to have a nice swim in the same water where these people are dying? Is that right?” That afternoon, and well into the night, he and Regina discussed what Pope Francis, on his first visit outside the Vatican, had described as “the globalization of indifference” to the plight of refugees at sea. “Papa Francesco said that everyone that could help, should do it, [and] with his own skills,” says Regina, who speaks English as well as her native Italian. “So we start to think, what are our capabilities? We have a good background in helping people in trouble.”

The consistency with which nearly every report on the US economy has deteriorated over the last few months is astonishing. Only the jobs report has been spared that sharp downdraft. So we blame the weather, which in parts of the US was truly atrocious, while in other parts, particularly in California, it was gorgeous. Too gorgeous. This is supposed to be our rainy season, but every day the sun is out as we’re heading into our fourth year of drought. Yet the drought isn’t what keeps people from shopping or companies from ordering equipment. So out here, we’re baffled when the weather gets blamed. Today’s durable goods report for February was another shot at this wobbly edifice of the US economy.

New orders for manufactured durable goods dropped by 1.4%, the Census Bureau reported. It was the third decrease in four months. Transportation equipment fell 3.5%, also the third decrease in four months. Excluding transportation, new orders – “core” durable goods – fell 0.4%, down for the fifth month in a row. And Core Capital Goods New Orders, considered an important gauge of business spending, fell 1.4%, down for the sixth month in a row. The weather is really hard to blame for this, so folks blamed the strong dollar and slack demand in the US and globally. The data was bad enough to push the Atlanta Fed’s GDPNow model of the US economy down another step toward zero growth in the first quarter.

The Atlanta Fed started the model in 2011 to offer a more immediate picture where the economy is headed. It takes into account economic data as released and adjusts its GDP forecast for the quarter as it goes. The model is volatile. It reacts to incoming monthly data that are themselves volatile and subject to sharp revisions. So a few strong releases for March could turn this thing around on a dime. But we’re still dealing with the reality of January and February; the data has been crummy, and the Atlanta Fed’s “nowcast” is increasingly depicting an economy that is losing its struggle with growth.

For most people, buying a home is no cheap venture. That’s especially the case when the growth in U.S. home prices is beating wage increases 13 to 1. Wages climbed by 1.3% from the second quarter of 2012 to the second quarter of 2014, compared to a 17% increase in home prices around that time, according to a new report from RealtyTrac. The real-estate data provider used the Labor Department’s weekly earnings data to measure wage growth, while home prices were derived from sales-deed data in December 2014 and compared to December 2012 on the hypothesis that a change in average wages would take at least six months to affect home prices.

Using localized earnings data, RealtyTrac also found that 76% of housing markets posted increases in home prices that exceeded the wage growth there during that time frame. How could this happen? Enter the investor. In many markets, the housing recovery has “largely been driven over the last two years by buyers who are not as constrained by incomes – namely the institutional investors coming in and buying up properties as rentals, and international buyers coming in and buying, often with cash,” Daren Blomquist, vice president at RealtyTrac and author of the report, said in an interview.

For demand from traditional buyers to improve, “either wages are going to need to go up or prices are going to need to at least flatten out and wait for wages to catch up,” he said. “You might say the third alternative is interest rates go down so you give people more buying power with their wages, but interest rates are about as low as they can go.” The trend illustrates the limited impact of the Federal Reserve’s decision to include mortgage-backed securities in its unprecedented asset-buying program. The Fed bought more than $1 trillion of those securities to prop up the housing market after it collapsed and helped trigger the worst recession in the post-World War II era.

The average UK household is set to hold close to £10,000 in unsecured debt by the end of 2016, according to a leading accountancy firm. The forecast, by PricewaterhouseCoopers, was made after 2014 saw a sharp rise in unsecured debt, which bounced back to an all-time high of £239bn. The 9% rise in borrowing last year brings the average to close to £9,000, but PwC reckons that will grow. That would mean households will be closing in on the £10,000 figure if trends continue. The household debt to income ratio is projected to reach 172% by 2020, exceeding its previous peak set before the financial crisis. It includes mortgages and other debt secured on property.

Most banks all but ceased lending during the 2007/2008 shock. While mortgage lending is more strictly controlled than it was, the tap has gradually loosened when it comes to unsecured debt. PwC’s Precious Plastic: How Britons fell back in love with borrowing, published today, finds that most consumers are confident that they can manage their debt, with fewer worried about job security and pay rises as the economy improves. But the report says that despite consumers’ confidence, affordability will increasingly be called into question as the debt to income ratio steadily increases over coming years.

The European Central Bank will purchase large amounts of public and private debt for at least 18 months and until it is convinced that inflation will stabilise near annual rates of 2%, the bank s president Mario Draghi has said, underscoring the ECB’s willingness to flood the eurozone with freshly minted money far into the future. In testimony to European parliament, Mr Draghi also urged Greece to commit to fully honouring its debt obligations. Its government also must be specific about areas of economic and fiscal reforms where it is in agreement with its international creditors and, where there is disagreement, how (the reforms) are going to be replaced has to be specified , he said.

Referring to the ECB s bond purchase program, now entering its third week, Mr Draghi said: We intend to carry out our purchases at least until end-September 2016, and in any case until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. Mr Draghi’s testimony comes two weeks after the ECB launched a program to purchase more than €1 trillion in bonds mostly government debt by September 2016. The purpose of the program, known as quantitative easing, or QE, is to raise inflation rates closer to the ECB’s target of near 2%.

The ECB has said it would buy bonds at a monthly clip of €60 billion and that the purchases could even extend beyond September of next year. The Governing Council will take a holistic perspective when assessing the path of inflation. It will evaluate the likelihood for inflation not only to converge to levels that are closer to 2%, but also to stabilise around those levels with sufficient confidence thereafter, Mr Draghi said. Consumer prices were down 0.3% from year-ago levels in February, the third-straight decline on an annual basis.

The Greek government will not receive €1.2bn in European rescue funds after officials ruled the Leftist government had no legal claims on the cash. Athens requested a return of the funds it said were erroneously handed to creditors from Greece’s own bank recapitalisation fund, the Hellenic Financial Stability Facility (HFSF). The transfer was originally arranged by the previous Greek administration. But eurozone officials have blocked the claim, saying it is “legally impossible” transfer the money back to the debt-stricken country. “There was agreement that, legally, there was no over payment from the HFSF to the EFSF,” said a fund spokesman. Germany’s finance ministry was also reluctant to allow the release, claiming there was “no reason” to make the transfer.

The decision is a further blow to the Greek government’s attempts to stay afloat over the next few weeks. Athens has been scrambling to make repayments to its creditors and continue to pay wages and pensions. The government now faces another €2.4bn cash squeeze in April, including a €450m loan repayment to the IMF on April 9. As part of its efforts to stay solvent, the Leftist government has also requested a €1.9bn transfer of profits held by the European Central Bank, from the holdings of Greek government bonds. So far, the ECB has rebuffed all Greek pleas to alleviate their cash squeeze. The central bank has moved to officially ban the country’s banks from increasing their holdings of short-term government debt.

Greek banks are being kept alive through the provision of an expensive form of emergency liquidity (ELA) which is rapidly being used up as capital flees the country. The ECB decided to incrementally raise the limit on ELA to €71bn – a bigger hike than in previous weeks.
Speaking in London on Wednesday, the ECB’s chief economist Peter Praet declined to comment on the Bank’s actions, saying it was important to exercise “verbal restraint” in moments of crisis. Worsening deposit flight has placed the squeeze on Greek lenders, who are only eligible for ELA as long as they are deemed to be solvent. Mr Praet said the country’s banks remained counterparties in their operations with the ECB, suggesting they remained healthy enough to continue receiving ELA.

Greece has until Monday to show how it will follow through on reform commitments after the euro area ruled out speedy access to aid funds, three officials said following a conference call of finance ministry deputies. The euro zone’s other 18 members were adamant on Wednesday’s call that Greece needs to deliver specific plans to see any more bailout cash, the officials said. Prime Minister Alexis Tsipras needs to show that Greece can rebuild trust in its promises, they said. Finance deputies left the door open to €1.2 billion that has been allocated to aid the banking system, as the deputies concluded that Greece can’t tap those funds on a technicality.

As a result, Greece will have to show it will move ahead with the changes its creditors are seeking to get the bank-aid money or other bailout funds. Greece won some financial breathing room Wednesday when the European Central Bank raised the ceiling for Emergency Liquidity Assistance to Greek banks by more than €1 billion to more than €71 billion, according to two people with knowledge of the decision who asked not to be named. The ECB’s move alleviates some near-term cash needs in the banking system while keeping pressure on Tsipras to find a longer-term solution. European officials have said that Greece could default on its obligations within weeks unless there’s a breakthrough.

Greece needs to act faster so its actions can be more effective, Eurogroup Chairman Jeroen Dijsselbloem, who heads the euro-area finance ministers’ group, said in Rotterdam on Wednesday. “The main problem is the same in every country in Europe: getting things done.” Monday will be a test of whether Greece can convince its peers that it will meet their demands for an economic overhaul, the officials said. Once Greece submits its next documents, they’ll need to be reviewed by the country’s official creditors and then the finance ministry deputies in the first few days of next week, ahead of Easter holidays, one of the officials said.

Bank of Greece Governor Yannis Stournaras said Wednesday that ditching the euro and exiting the single currency union is “not an option” for Greece. Mr. Stournaras told an audience at the London School of Economics that a Greek exit–dubbed “Grexit” in financial markets–risks triggering another severe downturn in the stricken Mediterranean economy. Greece has already improved its global competitiveness by driving down wages and prices, he said, and growth is returning. “Grexit would deliver no benefit, but a lot of pain,” Mr. Stournaras said. Quitting the eurozone would probably lead to even deeper austerity than Greece already has implemented, he said, while the adoption of an alternative currency would risk fueling runaway inflation.

His remarks come a day after the ECB instructed Greece’s biggest banks to refrain from taking on anymore short-term Greek government debt, adding to the pressure on Prime Minister Alexis Tsipras’s leftwing government in Athens to reach a deal with creditors over the terms of the nation’s €240 billion bailout package. Mr. Tsipras was elected in January on a pledge to reverse many of the budget cuts and other economic reforms demanded by Greece’s creditors in exchange for financial aid. But he has struggled to persuade lenders led by Germany and the IMF to back down, raising the specter of a disorderly Greek exit from the eurozone.

Greece now has just weeks to secure a deal to unlock billions of euros in badly needed funds to keep paying public-sector salaries and service the nation’s debts. Mr. Stournaras said Greece’s government has a unique opportunity to implement bold economic reforms and forge a durable recovery. “This is in my view a historical opportunity which should not be missed,” he said. He added that he’s more optimistic that Mr. Tsipras’s government is serious about reform than he was a month ago.

With the fight to keep Greece in the euro now in its sixth year, everyone is running out of patience. More importantly, Prime Minister Alexis Tsipras’s government in Athens is running out of money. While bond yields suggest investors expect Greece to stay in the euro, economists such as UniCredit Bank AG’s Erik Nielsen say it may be just a matter of time before he’s forced to print a new currency. Adopting the euro was always supposed to be a one-way ticket, so there is no legal precedent or political roadmap for an exit. If you’re waiting for a formal announcement of a clear resolution, you may be waiting a long time.

Next steps for Greece range from retaining the euro to catastrophic divorce; half-measures like having multiple currencies circulate, with aid recycled to repay foreign-currency debts, are also in the cards. Equally unclear is who would tell the world – and how – that Greece has entered an economic afterlife. Possible messengers include Tsipras, the ECB, EU President Donald Tusk and European Commission President Jean-Claude Juncker, among others.

Greece’s government has raided the coffers of its public health service and the Athens metro as it widens a hunt for funds to keep itself afloat and service debts. Athens faces a €1.7bn bill for wages and pensions at the end of the month and then a €450m loan payment to the IMF on April 9. Greek government and eurozone officials believe Athens does not have funds to cover both. In another constraint on Greece’s ability to raise cash, the ECB decided to impose stricter curbs on the issuance of short-term government debt. EU officials expressed hope that a marathon Monday night meeting between Alexis Tsipras and Angela Merkel, would spark long-stalled talks over economic reforms Greece must implement to unlock €7.2bn in frozen bailout aid.

Athens has promised to deliver a list of reforms to eurozone authorities by Monday. But officials cautioned that the list would still have to be agreed with bailout inspectors before eurozone authorities could make progress on any deal to free up new funding. Though Mr Tsipras discussed his reform plans with Ms Merkel on Monday night, there were few signs that talks in Athens with bailout inspectors had become more active following the Berlin meeting. “The big ‘if’ is that they seem to move at such a glacial pace,” said an official. Greek authorities have also been seeking €1.2bn in funding that they believe was wrongly taken out of the country’s bank recapitalisation fund by eurozone authorities.

But EU officials said a quick decision on the matter was unlikely and even if Athens was awarded the cash it could only go towards bank rescues, not general government coffers. In the absence of progress, some EU officials were accelerating their preparations in case Athens runs out of cash before it agrees a reform programme. In Brussels, European Commission officials have begun looking again at EU law governing capital controls in case the growing uncertainty, or a non-payment to the IMF, spurs a renewed run on bank deposits.

The Greek government is resorting to increasingly desperate measures to keep afloat amid dire warnings the debt-stricken country could go bust within weeks. In a balancing act not seen by any European administration in recent times, the cash-strapped coalition has sequestered the reserves of public bodies, seized EU subsidies destined for farmers and postponed all payments for state supplies in the scramble to continue servicing its debt and paying salaries and pensions. Pension funds have been raided to raise money for Treasury bill auctions. “It is clear we are reaching the end and very soon won’t be able to pay,” former finance minister, Stefanos Manos, said. “They are scraping the bottom of the barrel for everything they can find.”

To cover the credit crunch, corporations in which the state has a majority stake, including the Athens Metro, have been tapped. The scheme of repo transactions – where government bonds are used for short-term borrowing requirements – is believed to have raised upwards of €600m in recent weeks. Earlier this month the leftist-led coalition suspended some €300m of EU subsidies for farmers to help pay €1.7bn in public sector wages and pensions due next week. Greek subsidiaries of multinationals have also been approached for loans.

The last-resort measures came as Deutsche Bank warned that Athens was at risk of being pushed into default on 9 April when it must meet a €450m debt repayment to the International Monetary Fund. The precarious state of Athens’ finances has been exacerbated by a precipitous decline in tax revenues – more than €1bn below target since January – said the bank’s economists. Deposit flight has also ratcheted up the pressure. More than €20bn has fled the country since the beginning of the year as savers rush to withdraw funds, worried about Greece’s ability to remain in the euro. “The risk of capital controls continues to rise,” noted the Deutsche report.

The Bank of England’s website says that the “effective lower bound” for the interest rate it sets, Bank Rate, is the current rate of 0.5%. This is the level, according to the Bank, “below which it cannot be set” – the lowest practicable official interest rate. But on this important issue the website is behind the thinking of the Bank of England’s Monetary Policy Committee, which sets Bank Rate as its main tool to keep inflation on target. Because just over a month ago, the Bank’s governor said that if low inflation were to begin to depress expectations of inflation and wage growth, the MPC could “cut Bank Rate further towards zero”.

And with inflation well below the 2% target at zero, the Bank’s chief economist, Andy Haldane, has said – as a personal rather than institutional view – that there is a meaningful chance that Bank Rate will be cut. So what has happened to demonstrate to the Bank that 0.5% is not the practicable minimum. Partly it is the example of central banks – the European Central Bank and those of Switzerland, Sweden and Denmark – whose official rates are negative: banks that place funds with them are having interest deducted from their deposits, rather than receiving interest. Their rates are less than zero. The other contributor to the fall in the effective lower bound is the recovery of Britain’s banks.

This matters because the nearer Bank Rate approaches zero, the bigger the squeeze on the profits banks earn from borrowing and lending. Think of it this way. Competition between banks should bring down the interest rate on loans when Bank Rate is cut towards zero. But savings rates would be kept by competition above zero. So the gap between the interest rate paid and received by banks would narrow: the profits on this most basic of banking activities would fall. Also the windfall received by banks from all those interest-free deposits the banks hold would be significantly cut.

The United States has handled its economic diplomacy with shocking myopia. The US Treasury’s attempt to cripple the Asian Infrastructure Investment Bank (AIIB) before it gets off the ground is clearly intended to head off China’s ascendancy as a rival financial superpower, whatever the faux-pieties from Washington about standards of “governance”. Such a policy is misguided at every level, evidence of what can go wrong when a lame-duck president defers to posturing amateurs in Congress on delicate matters of global geostrategy. Washington has enraged Britain by trying to browbeat Downing Street into boycotting the project. It has forced allies and friendly countries across the Far East to make a fatal choice between the US and China that none wished to make, and has ended up losing almost everybody. Germany, France, and Italy are joining. Australia and South Korea may follow soon.

The AIIB is exactly what the world needs. China must recycle its trade surpluses and its $3.8 trillion reserves by one means or another. It can buy US Treasuries, Bunds, or Gilts, perpetuating a global bond bubble. It can make surgical investments abroad to acquire technology for its champions and pursue a narrow national interest. Or it can recycle the money in concert with other members of the AIIB – with a start-up capital of $50bn – for sewage projects, clean energy, ports, roads, and railways in Asia, helping to plug a $700bn shortfall in infrastructure investment that the World Bank is too small to cover and which is of collective benefit to the world. Britain recycled its surpluses in the 19th Century by building the world’s railways.

America did so in the 1950s through the Marshall Plan. China must do likewise, and it is hard to see why the AIIB is considered such a villainous variant. American officials castigated Britain for breaking ranks and embracing the project, as if it were kowtowing to an enemy. “We are wary about a trend of constant accommodation of China, which is not the best way to engage a rising power,” one US official told the Financial Times. One is left breathless at the historical folly of such a view in any case. As Henry Kissinger told Caixin magazine this week, the greater danger is that the US fails to accommodate the rise of China in an enlightened fashion, repeating errors made by the status quo powers faced with a prickly Germany before the First World War.

There are echoes of the Korean War in this Atlantic spat, though thankfully the stakes are less violent today. Britain tried to restrain General Douglas MacArthur and Washington’s hawks as they sent US forces charging through North Korea to the Yalu River and the Manchurian border in 1950, warning that it would force China to respond. MacArthur’s contemptuous riposte was to liken British reflexes to the betrayal of Czechoslovakia at Munich, of “desiring to appease the Chinese Communists by giving them a strip of Northern Korea.” The British experts were right. China threw four armies across the Yalu. America had arrogantly stumbled into a shooting war with the Chinese revolution, a cataclysmic mistake.

A planned takeover of the Italian tyre maker Pirelli by ChemChina is the latest in a string of Chinese acquisitions in Europe, topping up total foreign investment from China worth $18 billion in 2014, double 2013. Pirelli, the world’s fifth largest tyre maker, will be in Chinese hands after ChemChina confirmed a $7.7 billion bid on Sunday. The deal will give Pirelli a slice of the Chinese tyre market and could see its global market share rise to 10%. It’s one of the biggest European acquisitions by a Chinese company yet. But that’s unlikely to be the case for long. Chinese investors have shown increasing interest in Europe as a centre for investment in the last year, spurred on by the cheap euro and the opportunity to invest in legacy brands.

“Chinese investment in Europe has become much more diverse in recent years and is now extending into all parts of Europe.” said Thomas Gilles, Chairman of the EMEA-China Group at Baker & McKenzie. “What we’re seeing is the maturing and normalization of Chinese investment processes in line with the international economy.” The UK is top of the list. Last year, Chinese investors acquired several billion-dollar British investments. Pizza Hut went for a cool £940 million ($1.4 billion), while property bought by Chinese firms includes Chiswick Park for £875 million ($1.3 billion) and 10 Upper Bank Street for £497 million ($740 million).

Last week it emerged that a Chinese company backed by billionaire Guo Guangchang is looking acquire 18 buildings in Berlin’s Potsdamer Platz square, in what could be the biggest German property sale since 2007. Last year France sold Peugeot for £740 million ($1.1 billion).

Stopping a stampede isn’t easy – as that old cowpoke Uncle Sam’s discovering as more European nations bolt to join China’s Asian Infrastructure Investment Bank (AIIB). The weak Euro’s drawing a conga line of Chinese investments to Europe. The money’s being plunked down not only in “typical” Chinese sectors of historic interest like resources or transportation. It’s focusing geographically across the entire European opportunity and capability spectrum. The uplifting effects of this investment hasn’t been lost on the European countries who are now eager to climb aboard China’s AIIB. Ever since Europe embarked on their QE, and China has maintained stability in the yuan.

As we have noted, this is viewed as pre-condition for the non-convertible yuan to join the IMF’s SDR currency basket later this year. And the yuan has increased in value against the Euro almost 25% in one year – a trend likely to continue through the year with the long-term policies of the respective central banks likely to stay in place for the foreseeable future. According to the EU Observer: “Even before the crisis, these flows surged, tripling from less than US$1 billion per year in 2004-8 to roughly $3 billion in 2009-10. As the Eurozone crisis kicked in, Chinese investment tripled again to $10 billion in 2011. And last year, Chinese investors doubled their money in Europe to a record $18 billion.”

Chinese capital’s typically poking around for each European country’s relative market advantages. In the UK as with many foreign investors, the Chinese have focused on prime property, while in Germany they look for advanced technology. “The UK is the top destination for Chinese investment at $5.1 billion, followed by Italy at $3.5 billion,” the Observer said. As the capital needs of Southern Europe grow, Chinese capital has focused on privatisations and distressed opportunities, from the Greek ports connecting to their new Silk Road to Europe, to Portugal’s Espirito Santo Bank and Spain’s real estate foreclosures.

Moscow – which may or may not have to nuke Denmark – says the US has adopted a national security strategy that is decidedly anti-Russian. Although attempts to prove how “isolated” Putin truly is on the geopolitical stage haven’t fared very well of late (what with Russian bombers refueling at former U.S. air bases and Putin plotting Eurasian currency unions) and although Washington’s experience with China’s AIIB membership drive seems to indicate it may be the US that is in fact isolated, The Kremlin doesn’t think The White House is likely to give up on its attempts to ostracize Russia any time soon. From a Russian Security Council statement entitled “About The US National Security Strategy”:

In the long term, the United States, in cooperation with its allies will continue the policy of political and economic isolation of Russia, including limiting its ability to export energy and the displacement of all markets for military products, while making it difficult for the production of high-tech products in Russia.

Putin’s security council then proceeds to deliver a remarkably accurate description of Washington’s foreign policy aims including the desire to show off NATO military capabilities (on full display along the Russian border currently), installing puppet governments and propping them up with financial and military support (which is precisely what’s going on now in Ukraine as the US is set to provide military assistance and also financial assistance via a Ukrainian bond issue back by the full faith and credit of the US government), and preserving US hegemony by taking unilateral action across the globe at Washington’s behest (something the US does all the time):

The Strategy emphasizes the US desire to proceed with the formation of a new global economic order. A special place in this order should take a Trans-Pacific Partnership and transatlantic trade and investment partnership that will enable the US central position in the free trade zones, covering two-thirds of the world economy. The armed forces are considered as the basis of US national security and military superiority is considered a major factor in the American world leadership. While maintaining the continuity of the plans to use military force unilaterally and anywhere in the world, as well as to maintain a military presence abroad…

Significant efforts by the US and its allies will be directed to the formation of anti-Russian policy states, with which Russia has established partnership relations, as well as to reduce Russian influence in the former Soviet Union. Continue the policy of preserving the global dominance of the United States, increasing the combat capabilities of NATO, as well as to strengthen the US military presence in the Asia-Tihokeanskom region. Military force will continue to be considered as the primary means of ensuring national security and interests of the United States. Becoming more widespread to eliminate unwanted US political regimes acquire advanced technology “color revolutions” with a high probability of their application in relation to Russia.

Panic reached the inner sanctum of the Russian central bank. It was Dec. 16 – the day Russian traders would later christen Black Tuesday – and the ruble was in a freefall.“Intervene! Intervene!” a central bank official shouted. Governor Elvira Nabiullina watched the currency on her tablet screen react to her emergency rate increase. No, she said, not this time: Russia would no longer fight the market. Speculators needed a cold shower, she said. That daring decision, related by two people with knowledge of the meeting, has begun to pay off for Nabiullina, 51, and her patron, President Vladimir Putin. Despite sanctions meant to punish Russia for its foray into Ukraine a year ago, the ruble has stabilized. Since Black Tuesday, when it plunged to a record low, the ruble has rebounded 19% against the dollar, the most among 24 emerging-market currencies.

Russia still confronts a painful recession brought on by the collapse in oil, and many of its banks are hurting. But for now, at least, the economy has stepped back from the abyss. Finance Minister Anton Siluanov last week declared the worst was over. Inside the central bank, near Red Square, the lull passes for victory. Nabiullina no longer has to squander foreign-exchange reserves in vain attempts to prop up the ruble. Now she faces the equally daunting task of binding up the wounded economy. While her central bank is nominally independent, analysts agree Putin is ultimately in charge. Yet Nabiullina has emerged as a power in her own right, with a direct line to the president.

Nabiullina isn’t afraid to speak up. When aides urged Putin to impose capital controls last year, she fought against the move and pushed for a freely floating ruble, according to people with knowledge of the matter. Putin heeded her advice — and then let Nabiullina sort out the details. “It was a historic moment because she convinced Putin to accept a market solution to a problem that threatened the whole banking system,” UBS AG Russia Chairman Rair Simonyan said. Russia might well have veered into economic isolation, he said. What Nabiullina came up with turned out to be one of the biggest financial gambles of Putin’s 15-year rule. First she raised interest rates to punishingly high levels, lifting the benchmark rate to 17% from 10.5% in one stroke. Then she stepped back from intervening on the currency market.

Juan Ovelar made a quick decision when he heard the U.S. government had accused his Andorran bank of money-laundering, and immediately withdrew most of his funds. “I’m worried that everyone will do the same as I did and there will be a knock-on effect that could affect other banks,” said Ovelar, 27, a computer expert from Argentina, in an interview outside the headquarters of Banca Privada d’Andorra in the capital Andorra La Vella. The U.S. Treasury named Banca Privada d’Andorra, the country’s fourth-largest bank, a “primary money-laundering concern” on March 10. That led to its seizure by Andorran authorities, the arrest of the chief executive officer and a run on customer funds at the lender’s Spanish unit.

The bank’s fate sent tremors through Andorra, a 181-square-mile (469 km2) Catalan-speaking microstate in the eastern Pyrenees with an economy based on skiing, tax-free shopping and banking. The scandal raises risks for its financial industry, which makes up almost a fifth of the €1.8 billion economy and is too big to be bailed out by the state, said Xavier Puig, a professor at Barcelona’s Universidad Pompeu Fabra. Customers lined up at the bank’s branches to take out their money after it limited cash withdrawals to 2,500 euros a week, starting March 16. The bank’s new management, appointed by local regulators, imposed the limit after international banks severed credit lines, a person with knowledge of the situation said.

Andorra’s government is trying to convince international banks to open credit lines so customers won’t be cut off from funds, said the person, who asked not to be identified because the talks are private. Options under consideration for the bank include the sale of assets or liquidation, the person said, adding that officials are seeking a quick solution to limit the effect on other banks. “The government is acting quickly to find a solution because the consequences can be very serious,” said Puig. “They need to amputate this part so that the gangrene doesn’t extend to the rest of the body.” Fitch Ratings put the three largest Andorran banks on watch for a possible downgrade on Monday because of “potential spill-over effects.”

Neoconservative pundit Robert Kagan and his wife, Assistant Secretary of State Victoria Nuland, run a remarkable family business: she has sparked a hot war in Ukraine and helped launch Cold War II with Russia – and he steps in to demand that Congress jack up military spending so America can meet these new security threats. This extraordinary husband-and-wife duo makes quite a one-two punch for the Military-Industrial Complex, an inside-outside team that creates the need for more military spending, applies political pressure to ensure higher appropriations, and watches as thankful weapons manufacturers lavish grants on like-minded hawkish Washington think tanks.

Not only does the broader community of neoconservatives stand to benefit but so do other members of the Kagan clan, including Robert’s brother Frederick at the American Enterprise Institute and his wife Kimberly, who runs her own shop called the Institute for the Study of War. Robert Kagan, a senior fellow at the Brookings Institution (which doesn’t disclose details on its funders), used his prized perch on the Washington Post’s op-ed page on Friday to bait Republicans into abandoning the sequester caps limiting the Pentagon’s budget, which he calculated at about $523 billion (apparently not counting extra war spending). Kagan called on the GOP legislators to add at least $38 billion and preferably more like $54 billion to $117 billion.

Twelve years ago last week, the US launched its invasion of Iraq, an act the late General William Odom predicted would turn out to be “the greatest strategic disaster in US history.” Before the attack I was accused of exaggerating the potential costs of the war when I warned that it could end up costing as much as $100 billion. One trillion dollars later, with not one but two “mission accomplished” moments, we are still not done intervening in Iraq. President Obama last year ordered the US military back into Iraq for the third time. It seems the Iraq “surge” and the Sunni “Awakening,” for which General David Petraeus had been given much credit, were not as successful as was claimed at the time.

From the sectarian violence unleashed by the US invasion of Iraq emerged al-Qaeda and then its more radical spin-off, ISIS. So Obama sent the US military back. We recently gained even more evidence that the initial war was sold on lies and fabrications. The CIA finally declassified much of its 2002 National Intelligence Estimate on Iraq, which was the chief document used by the Bush Administration to justify the US attack. According to the Estimate, the US Intelligence Community concluded that:

‘[W]e are unable to determine whether [biological weapons] agent research has resumed…’ And: ‘the information we have on Iraqi nuclear personnel does not appear consistent with a coherent effort to reconstitute a nuclear weapons program.’

But even as the US Intelligence Community had reached this conclusion, President Bush told the American people that Iraq, “possesses and produces chemical and biological weapons” and “the evidence indicates that Iraq is reconstituting its nuclear weapons program.” Likewise, Defense Secretary Donald Rumsfeld’s “bulletproof” evidence that Saddam Hussein had ties with al-Qaeda was contradicted by the National Intelligence Estimate, which concluded that there was no operational tie between Hussein’s government and al-Qaeda. Even National Security Advisor Condolezza Rice’s famous statement that the aluminum tubes that Iraq was purchasing “are only really suited for nuclear weapons programs, centrifuge programs,” and “we don’t want the smoking gun to be a mushroom cloud,” was based on evidence she must have known at the time was false. According to the NIE, the Energy Department had already concluded that the tubes were “consistent with applications to rocket motors” and “this is the more likely end use.”

Imagine a wonderful world, a planet on which there was no threat of climate breakdown, no loss of freshwater, no antibiotic resistance, no obesity crisis, no terrorism, no war. Surely, then, we would be out of major danger? Sorry. Even if everything else were miraculously fixed, we’re finished if we don’t address an issue considered so marginal and irrelevant that you can go for months without seeing it in a newspaper. It’s literally and – it seems – metaphorically, beneath us. To judge by its absence from the media, most journalists consider it unworthy of consideration. But all human life depends on it. We knew this long ago, but somehow it has been forgotten. As a Sanskrit text written in about 1500BC noted: “Upon this handful of soil our survival depends. Husband it and it will grow our food, our fuel and our shelter and surround us with beauty. Abuse it and the soil will collapse and die, taking humanity with it.”

The issue hasn’t changed, but we have. Landowners around the world are now engaged in an orgy of soil destruction so intense that, according to the UN’s Food and Agriculture Organisation, the world on average has just 60 more years of growing crops. Even in Britain, which is spared the tropical downpours that so quickly strip exposed soil from the land, Farmers Weekly reports, we have “only 100 harvests left”. To keep up with global food demand, the UN estimates, 6m hectares (14.8m acres) of new farmland will be needed every year. Instead, 12m hectares a year are lost through soil degradation. We wreck it, then move on, trashing rainforests and other precious habitats as we go. Soil is an almost magical substance, a living system that transforms the materials it encounters, making them available to plants.

That handful the Vedic master showed his disciples contains more micro-organisms than all the people who have ever lived on Earth. Yet we treat it like, well, dirt. The techniques that were supposed to feed the world threaten us with starvation. A paper just published in the journal Anthropocene analyses the undisturbed sediments in an 11th-century French lake. It reveals that the intensification of farming over the past century has increased the rate of soil erosion sixtyfold. Another paper, by researchers in the UK, shows that soil in allotments – the small patches in towns and cities that people cultivate by hand – contains a third more organic carbon than agricultural soil and 25% more nitrogen. This is one of the reasons why allotment holders produce between four and 11 times more food per hectare than do farmers.

“Why is the water bill so high? In the last few years, have you ever tried to understand why something that should be a right is now something that makes a big hole in your savings? Someone would like to ruin the results of the 2011 referendum, in which a massive majority of the Italian people said “no” to every law that could place the handling of public water into private hands. However, in Italy, strange things are happening: water is cut off indiscriminately and without warning on a regular basis, the price of water has gone up by 95.8% in the last few years, the profits of the municipal companies are no longer being reinvested to reduce leakage but to maximise profits. Basically, those who are now managing water resources are today thinking more about making profits, rather than about providing a service.

The money we are paying in water bills is going to enrich the shareholders with generous dividends. This is a camouflaged privatisation and it is going against what was expressed as the will of the people. The 5 Star MoVement is taking to the European Parliament one of its historical battles: that of defending one of its five stars, keeping water in public hands. The proposal is simple: NO ONE MUST GO THIRSTY The World Health Organization has done the calculations: for an individual’s minimum needs between 50 and 100 litres of water a day are required. This amount must be guaranteed for all. This is why the 5 Star MoVement is proposing a service that provides a guaranteed minimum water supply for each person. It’s not acceptable to get rich by trading in water. That’s the message from the European citizens that have signed a petition asking European institutions NOT to privatise water.

1 million 800 thousand signatures for the first example of direct democracy in Europe. The Commission’s response has been disappointing because it hasn’t put forward any new legislative proposal. The principles contained in its communication are sacred but these need to be reinforced with laws, not just words. Furthermore, as regards the dreaded liberalization of public water, the Commission has underlined that it is up to the member States to make the laws. in particular, it has emphasised that the supply of water is the responsibility of the local authorities within the member State, and it is up to them to make the decisions as to whether to manage the supply directly, indirectly or by using private suppliers.